The housing market is witnessing its highest growth rate in a decade, with continued historically low interest rates and lean inventories. Despite rising mortgage rates recently, increasing demand from millennials is expected to continue driving housing market growth.
In addition, due to the increase in worker productivity during the pandemic, many businesses are expected to continue their remote or hybrid working structures. As people continue to upgrade their homes or shift to suburban areas in pursuit of more comfortable work environments, the demand for home improvement products should keep rising. In response to this, many home improvement companies are introducing user-friendly features in their products, launching mobile apps, and delivering their services to the door. According to the Leading Indicator of Remodeling Activity (LIRA), the home renovation and repair expenditure is expected to grow 3.8% to reach $352 billion by the end of 2021.
Therefore, we expect home improvement stocks The Sherwin-Williams Company (SHW), Whirlpool Corporation (WHR), and Mohawk Industries, Inc. (MHK) to generate significant returns in the coming months.
The Sherwin-Williams Company (SHW)
SHW is engaged in the development, manufacture, distribution and sale of paint, coatings and related products. The company operates through three segments—The Americas Group, Consumer Brands Group, and Performance Coatings Group. It serves retailers, dealers, jobbers, licensees, and other third-party distributors through its branches and direct sales staff and outside sales representatives. The company has operations mainly in North and South America, the Caribbean, Europe, Asia and Australia.
On March 15, SHW announced that as per its Asia-Pacific marketing strategy for its industrial wood coatings business it will be developing an Odor Evaluation Center in China and a brand-new Low Odor Series that will consist of eight wood coatings products. Also this month, the company’s board of directors also paid its regular quarterly dividend of $1.65 per common share. It marked the 42nd consecutive year of dividend increases. Furthermore, SHW’s board of directors has declared a three-for-one stock split on February 3, 2021 in the form of a stock dividend, thus making the stock more accessible to employees and investors.
SHW is scheduled to release its financial results for its fiscal 2021 first quarter, ending March 31, 2021, on April 27. For the fourth quarter (ended December 31, 2020) the company’s net sales have increased 9.1% year-over-year to $4.49 billion. Its gross profit has increased 12.4% year-over-year to $2.13 billion. Also, SHW’s net income of $407 million for the fourth quarter represents a 63.7% rise year-over-year. The company’s adjusted EPS has increased 19.2% year-over-year to $5.09.
Analysts expect SHW’s EPS to improve 20.1% year-over-year for the current quarter, ending March 31, to $4.90. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And its consensus revenue estimate of $5.03 billion for the next quarter, ending June 30, 2021, represents a 9.9% rise on a year-over-year basis.
The stock has gained 64.5% over the past year and closed yesterday’s trading session at $756.31.
SHW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Quality and a B grade for Stability. We have also graded SHW for Value, Momentum, Growth, and Sentiment. Click here to access all SHW’s ratings.
SHW is ranked #29 of 64 stocks in the A-rated Home Improvement & Goods industry.
Whirlpool Corporation (WHR)
Headquartered in Benton Harbor, Mich., WHR is a manufacturer and marketer of home appliances and related products. It operates through four segments: North America, Europe, Middle East and Africa (EMEA), Latin America, and Asia. WHR’s products include laundry appliances, refrigerators and freezers, cooking appliances, dishwashers and mixers. It sells its products to retailers, distributors, dealers, builders and directly to consumers.
WHR launched a new app—Whirlpool App 2.0—for both Android and iOS device users on March 18. Also, as per the U.S. News & World Report’s 360 Review roundups, WHR has been recognized as among the best Washers and Dryers of 2021. 2021. In February, WHR was recognized by Fortune Magazine as one of the World’s Most Admired Companies for the eleventh consecutive year. It’s board of directors paid a quarterly dividend of $1.25 per share on the company’s common stock on March 15,
WHR’s net sales were $5.80 billion for the fourth quarter, ended December 31, which represents an improvement of 7.7% year-over-year. While its operating profit came in at $716 million for the fourth quarter, up 68.9% year-over-year, its net earnings were $497 million, up 72.6% year-over-year. Also, the company’s non-GAAP EPS increased 35.2% year-over-year to $6.64.
A consensus EPS estimate of $5.23 for the next quarter, ending June 30, 2021, represents a 143.3% rise year-over-year. WHR also surpassed the consensus EPS estimates in each of the trailing four quarters. Also, its consensus revenue estimate of $4.73 billion for the next quarter, ending June 30, 2021, represents a 32.5% rise from the prior year period.
The stock has rallied 157.4% over the past year to close yesterday’s trading session at $216.85.
WHR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Value and Momentum as well. In addition to the POWR Ratings grades we’ve just highlighted, one can see WHR’s ratings for Growth, Stability, Quality, and Sentiment here.
WHR is ranked #31 in the same industry.
Mohawk Industries, Inc. (MHK)
MHK designs, manufactures, sources, distributes, and markets flooring products for remodeling and for new constructions of residential and commercial spaces. The company operates primarily through three segments: Global Ceramic, Flooring North America (Flooring NA) and Flooring Rest of the World (Flooring ROW). Its Global Ceramic segment designs, manufactures, sources, distributes and markets a line of ceramic tile, porcelain tile and natural stone products used in the residential and commercial markets.
The company recently appointed James F. Brunk as its chief financial officer, effective April 1, 2021 following the retirement of its current CFO Frank H. Boykin. MHK also had an impressive performance in its fiscal 2020 fourth quarter. Jeffrey S. Lorberbaum, Chairman and CEO, commented that, “Our fourth quarter results exceeded our expectations as we posted our highest ever quarterly sales. All of our markets saw strengthening residential purchases, with laminate, LVT and sheet vinyl outperforming other flooring categories.”
The company’s net sales have increased nearly 9% year-over-year to $2.64 billion for the fourth quarter ended December 31, 2020. MHK’s adjusted gross profit came in at $760.87 million, which represents a 13.9% improvement year-over-year. The company’s adjusted operating income was $305.13 million, up 49% year-over-year. Its adjusted net earnings have also increased 55.9% year-over-year to $252.01 million for the quarter. Also, MHK’s adjusted EPS has increased 57.3% year-over-year to $3.54.
Analysts expect MHK’s EPS for the next quarter, ending June 30, 2021, to be $3.04, up 721.6% year-over-year. It’s earnings surprise history looks impressive; the company has surpassed the consensus EPS estimate in each of the trailing four quarters. Also, for the next quarter, ending June 30, analysts expect MHK’s revenue to be $2.61 billion, representing a 40.3% rise from the prior-year period.
The stock has gained more than 145% over the past year to close yesterday’s trading session at $191.27. It has more than tripled since hitting its 52-week low of $60.05.
It’s no surprise that MHK has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Sentiment and Quality. Click here to see the additional POWR Ratings for MHK (Growth, Value, Momentum, and Stability).
MHK is ranked #9 in the same industry.
The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
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SHW shares were trading at $746.22 per share on Tuesday afternoon, down $10.09 (-1.33%). Year-to-date, SHW has gained 1.79%, versus a 5.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…
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