Buy Sherwin-Williams as higher costs are already baked into the stock, Bank of America says
The inflation-driven decline for Sherwin-Williams has gone far enough, according to Bank of America. Analyst Steve Byrne upgraded Sherwin-Williams to buy from neutral, saying that the issues facing the chemicals sector are already accounted for in the stock priced. "While raw material cost pressures have continued to escalate since our downgrade on SHW last fall, and we are once again revising estimates to reflect further cost pressure in line with our aggregator, we believe these challenges are largely already reflected in valuation," Byrne wrote. "Given few specialty chems have SHW's pricing power, we expect SHW's gross margins be will among the first to expand, and thus we are upgrading to Buy." Additionally, Sherwin-Williams could be a way to bet on the U.S. economy over Europe. "We also note that Sherwin has the least EU exposure of the US specialty chems, and well below the other coatings companies," Byrne wrote. Bank of America did lower its price target on Sherwin-Williams to $296 per share from $325. The new target is still 20% above where the stock closed on Monday. Shares of Sherwin-Williams have significantly underperformed the broader in market in 2022, dropping 30% year to date. —CNBC's Michael Bloom contributed to this report.

Pigment is added to a gallon of ProMar 200 paint, an interior latex with zero volatile organic compounds, at a Sherwin-Williams store in Princeton, Illinois. Daniel Acker | Bloomberg | Getty Images