Investing.com -- Evercore ISI added Sherwin-Williams Company (NYSE:SHW) to its Tactical Outperform (TAP) List ahead of the company's fourth-quarter earnings, citing an improving setup for 2025.
The investment bank expects Sherwin-Williams to benefit from pricing and market share gains, a favorable home improvement environment, and a conservative yet achievable initial guidance for 2025.
Despite the anticipation of guidance falling below the current sell-side consensus, Evercore analysts suggest the forecasted earnings per share (EPS) range of $12-$12.50 should be well-received by investors, “providing multiple ways for SHW to win throughout 2025,” they said.
Evercore's bullishness on Sherwin-Williams comes as the stock has seen a decline of approximately 10% from its late 2024 high, while the firm's Home Improvement Lead Indicator has reached multiyear highs.
The analysts believe that the conservative guidance for 2025, likely influenced by industrial and commercial risks, foreign exchange translation, and interest expenses, has led to the stock's underperformance compared to its peers.
However, they remain confident in Sherwin-Williams' prospects, holding a $12.75 EPS estimate and projecting a strong home improvement sector into 2025.
In addition to Sherwin-Williams, Evercore has also updated its stance on Lululemon Athletica (NASDAQ:LULU), adding the company to its Top 5 Outperform List and raising the price target from $440 to $495.
The firm's confidence in Lululemon is bolstered by the belief that product issues from 2024 have been resolved, and new innovations are expected to drive improvements in the first quarter of 2025.
Positive trends confirmed at the ICR Conference and the anticipated return of product newness have raised expectations for a rebound in America's same-store sales (SSS).
Evercore also notes that Lululemon's recent product showcases have received favorable reviews, suggesting a shift back to core athletic styles with new fabrics.
Moreover, it highlights changes made to Lululemon's design process, which aim to integrate marketing and merchandising insights earlier, potentially leading to more effective collaboration among teams.
Despite concerns over margin pressures, Evercore maintains a conservative estimate for a slight EBIT margin compression in 2025.
“But at this point, we think the debate around whether LULU will guide for an SG&A catch up year is somewhat of a sideshow with larger long-term product engine forces at play,” analysts added.
Analysts also touched upon Alo Yoga's pivot towards launching luxury and lifestyle products, which they believe may reduce competitive pressure on Lululemon, as the former focuses on expanding its luxury sub-brand and diversifying its product offerings.