Sherwin-Williams, Valspar Fall on Raw-Material Shortage, Housing Concern

Paint makers Sherwin-Williams Co. and Valspar Corp. fell in New York after analysts downgraded the shares amid concerns that earnings will be hurt by a weak U.S. housing market and raw-material shortages.

Sherwin-Williams, based in Cleveland, dropped $1.97, or 2.7 percent, to $71.25 as of 11:11 a.m. in New York Stock Exchange composite trading. Valspar, based in Minneapolis, declined $1.12, or 3.4 percent, to $31.41.

Goldman Sachs Group Inc. analysts led by Robert Koort issued a report today cutting Sherwin-Williams, the biggest U.S. paint retailer, to “sell” from “neutral” because of potential slowing economic growth in the second half and “a cautious view on U.S. housing.” Koort, based in Houston, cut his price target on the shares to $71 from $77.

Paint makers are raising prices as they try to overcome shortages of ingredients such as acrylic and titanium dioxide. Gains in paint sales slowed in June at Lowe’s Cos. stores partly because raw-material shortages have reduced the availability of some Valspar products, said Longbow Research analyst Dmitry Silversteyn.

“We are growing increasingly concerned with lost volumes due to raw-material shortages, high prices of scarce raw materials and the possible need for Valspar to build inventory of high-priced raw materials, all of which may depress gross margins below our previous expectations,” Silversteyn said today in a report.

Silversteyn downgraded shares of Valspar, the world’s sixth-biggest coatings maker, to “neutral” from “buy” and reduced his 2010 and 2011 earnings estimates.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

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