Sherwin-Williams Co. (NYSE:SHW)

Current Income Tax Expense

The current income tax expense exhibited a fluctuating yet overall increasing trend over the five-year period. Starting at $634,100 thousand in 2020, it decreased significantly to $464,500 thousand in 2021. Subsequently, it rose sharply to $697,800 thousand in 2022 and continued to increase in 2023 and 2024, reaching $845,300 thousand by the last reported period. This pattern suggests variability in the company’s taxable income or adjustments in tax rates and regulations that impacted the current tax obligations.

Deferred Income Tax Expense

The deferred income tax expense, recorded as a negative figure (indicating either deferred tax benefits or reductions), showed a general decreasing trend in absolute terms over the duration. It was -$145,300 thousand in 2020, lessened to -$80,300 thousand in 2021, then increased again in absolute size to -$144,800 thousand in 2022. This amount then declined in magnitude to -$88,900 thousand in 2023 and further to -$74,900 thousand in 2024. These fluctuations imply changes in temporary differences between accounting and tax treatments, affecting deferred tax assets or liabilities.

Provisions for Income Taxes

The total provision for income taxes, combining current and deferred components, depicted a consistent upward trajectory across the observed years. Beginning at $488,800 thousand in 2020, the provision decreased to $384,200 thousand in 2021 but subsequently increased substantially to $553,000 thousand in 2022. Thereafter, it continued to grow to $721,100 thousand in 2023 and $770,400 thousand in 2024. This overall rise aligns with the patterns in current tax expense, indicating an increasing tax burden net of deferred tax effects.

General Insights

The data reveals that the company’s current tax expenses are the primary driver of fluctuations in total income tax provisions. The stabilization and reduction of the deferred tax expense in recent years may suggest more consistent recognition of deferred tax assets or adjustments in tax timing differences. The gradual increase in provisions for income taxes towards the end of the period could reflect improved profitability, changes in tax legislation, or other factors influencing taxable income.

Statutory Federal Income Tax Rate

The statutory federal income tax rate remained constant at 21% over the entire analyzed period from 2020 through 2024.

State and Local Income Taxes

State and local income taxes as a percentage of income showed a generally increasing trend, starting at 2.5% in 2020 and rising steadily to 3.2% by 2024, indicating higher relative tax burdens at the state and local levels over time.

Investment Vehicles

The percentage related to investment vehicles was negative throughout the period, reflecting a reducing impact on the effective tax rate. The value moved slightly from -0.8% in 2020 and 2021 to a less negative -0.4% in 2022, then stabilized at -0.5% in the last two years, suggesting a minor reduction in this tax benefit or cost over time.

Employee Share-Based Payments

Employee share-based payments impacted the tax rate negatively, reducing it by 3.8% in 2020, increasing in effect to -4.8% in 2021, then significantly lessening in impact to -1.4% and -1.1% in 2022 and 2023 respectively, before partially increasing again to -2.1% in 2024. This pattern suggests fluctuating tax benefits or expenses related to employee compensation mechanisms during the period.

Research and Development Credits

Research and development credits consistently reduced the effective tax rate, though the magnitude of the effect slightly declined from -0.5% in 2020 to -0.3% in 2024, indicating diminishing relative benefits from these credits over time.

Amended Returns and Refunds

Amended returns and refunds showed minor and erratic fluctuations, starting at 0.3% in 2020, decreasing to 0.2% in 2021 and 2023, peaking at 0.4% in 2022, and dipping slightly to -0.2% in 2024. The inconsistency suggests occasional adjustments impacting taxes but without a clear directional trend.

Taxes on Non-U.S. Earnings

Taxes on non-U.S. earnings improved from an initial absence of impact in 2020 to a negative effect of -0.4% in 2021, then shifted to positive values of 0.2% in 2022, rising to 0.8% in 2023 and 1.1% in 2024. This indicates increasing tax costs or reduced benefits associated with foreign income over the period.

Other, Net

The category "other, net" showed variable contributions, starting positively at 0.7% in 2020, decreasing to 0.3% in 2021, turning negative to -0.5% in 2022, and then rebounding slightly to 0.2% and 0.1% in 2023 and 2024 respectively, suggesting miscellaneous tax effects with no clear trend.

Reported Effective Tax Rate

The reported effective tax rate exhibited variability, beginning at 19.4% in 2020, decreasing to 17.1% in 2021, then rising sharply to 21.5% in 2022 and peaking at 23.2% in 2023 before a slight decline to 22.3% in 2024. This overall increase from 2021 onwards reflects higher total tax burdens influenced by changes in state and local taxes, taxes on non-U.S. earnings, and diminishing tax credits and benefits.

Environmental and Other Similar Items

There is a general declining trend from 82,900 thousand USD in 2020 to 66,800 thousand USD in 2024, with a slight rebound in 2023 to 72,000 thousand USD. This indicates a reduction in these expenses or provisions over the period, despite minor fluctuations.

Employee Related and Benefit Items

The values show some variability with an initial increase from 166,600 thousand USD in 2020 to 170,300 thousand USD in 2021, a drop in 2022 to 157,100 thousand USD, followed by a rise to 175,200 thousand USD in 2024. This pattern suggests fluctuating employee-related costs, possibly reflecting changes in headcount, benefits, or compensation policies.

Operating Lease Liabilities

Operating lease liabilities exhibit a steady upward trend over the period, rising from 448,900 thousand USD in 2020 to 499,600 thousand USD in 2024. This continuous increase indicates an expanding lease portfolio or higher lease obligations.

Research and Development Capitalization

This item begins with missing data for 2020 and 2021 but shows increasing capitalization from 52,600 thousand USD in 2022 to 103,900 thousand USD in 2024. The upward trend suggests growing investment in R&D activities being capitalized on the balance sheet.

Other Items (Positive)

These amounts decline sharply from 232,800 thousand USD in 2020 to 192,000 thousand USD in 2021, then gradually increase to 206,500 thousand USD in 2024. Although fluctuating, the overall movement reflects some stabilization in other miscellaneous positive items.

Deferred Tax Assets

Deferred tax assets show a fluctuating upward trend, starting at 931,200 thousand USD in 2020 and increasing to 1,052,000 thousand USD in 2024. This indicates growing recognized tax benefits likely related to timing differences or tax loss carryforwards.

Intangible Assets and Property, Plant, and Equipment

This composite line item is consistently negative, showing a reduction in net book value from -1,156,400 thousand USD in 2020 to -948,700 thousand USD in 2024. The decreasing magnitude of the negative value suggests a net depreciation or impairment alongside possible disposals or amortization over time.

LIFO Inventories

LIFO inventories also persistently show negative values, with increasing absolute magnitude from -87,600 thousand USD in 2020 to -120,500 thousand USD in 2024. The growing negative balance may indicate LIFO layer reductions or inventory valuation adjustments.

Operating Lease Right-of-Use Assets

This asset category remains negative and demonstrates a steady increase in absolute value from -434,000 thousand USD in 2020 to -482,100 thousand USD in 2024, reflecting the higher lease obligations noted previously and consistent capitalization of lease assets.

Other Items (Negative)

Negative other items fluctuate moderately, increasing from -31,700 thousand USD in 2020 to a more negative -40,700 thousand USD in 2024, suggesting slightly increased liabilities or adjustments within this category over time.

Deferred Tax Liabilities

Deferred tax liabilities decrease overall in absolute terms from -1,709,700 thousand USD in 2020 to -1,592,000 thousand USD in 2024, exhibiting some variability but trending towards a reduction in deferred tax obligations.

Net Deferred Tax Assets (Liabilities)

The net position of deferred tax assets and liabilities remains negative throughout the period but shows a gradual improvement from -778,500 thousand USD in 2020 to -540,000 thousand USD in 2024. This suggests a narrowing net deferred tax liability, potentially indicative of improved tax position or better utilization of deferred tax assets.

Deferred Tax Assets

Deferred tax assets decreased slightly from 67,600 thousand US dollars in 2020 to 62,800 thousand US dollars in 2021. Subsequently, they increased to 77,000 thousand US dollars in 2022 and remained stable at the same level in 2023. However, in 2024, there was a noticeable decline back to 67,500 thousand US dollars, approximately the level observed in 2020. Overall, deferred tax assets exhibited minor fluctuations with a temporary peak in 2022 and 2023, followed by a reversion to earlier levels.

Deferred Tax Liabilities

Deferred tax liabilities showed a consistent downward trend throughout the period. Starting at 846,100 thousand US dollars in 2020, the liabilities decreased to 768,200 thousand in 2021, then further declined to 681,600 thousand in 2022. A slight increase to 683,100 thousand occurred in 2023, but this was followed by a more pronounced drop to 607,500 thousand in 2024. The overall pattern reflects a significant reduction in deferred tax liabilities over the five-year span, representing a declining obligation in this category.

The analysis of the financial data over the five-year period reveals several notable trends and shifts across key balance sheet and income statement items.

Total Assets

Both reported and adjusted total assets have shown a steady increase from 2020 through 2024. Reported total assets increased from approximately 20.4 billion USD in 2020 to 23.6 billion USD in 2024, reflecting a growth of about 15.8%. Adjusted total assets follow a similar trajectory, rising from roughly 20.3 billion USD to 23.6 billion USD over the same period. This consistent upward trend indicates ongoing asset growth.

Total Liabilities

Reported total liabilities increased from around 16.8 billion USD in 2020 to 19.6 billion USD in 2024, with a peak in 2022 at roughly 19.5 billion USD before a slight moderation in 2023. Adjusted total liabilities exhibit a similar pattern, rising from 15.9 billion USD to approximately 19.0 billion USD over five years. The data suggests an overall increase in liabilities, although adjusted liabilities remain lower than reported figures, indicating the effect of adjustments related to deferred and income taxes.

Shareholders’ Equity

Reported shareholders’ equity experienced volatility, initially decreasing from 3.6 billion USD in 2020 to 2.4 billion USD in 2021, before recovering and increasing to 4.1 billion USD in 2024. Adjusted equity follows a comparable pattern but at consistently higher values, starting at approximately 4.4 billion USD in 2020 and reaching 4.6 billion USD in 2024. The dip in 2021 may point to extraordinary adjustments or impacts during that fiscal year, with subsequent growth indicating strengthened equity position.

Net Income

Reported net income shows fluctuation but generally upward movement, decreasing from 2.0 billion USD in 2020 to 1.9 billion USD in 2021, then increasing continuously to 2.7 billion USD in 2024. Adjusted net income mirrors this pattern, starting lower than the reported figures but converging closer over time, rising from about 1.9 billion USD to 2.6 billion USD in the final year. This suggests an improving profitability profile, with adjustments impacting earlier periods more significantly and diminishing over time.

Overall, the data indicates that the company has been expanding its asset base and managing increasing liabilities, with an improving equity position and growing profitability towards the end of the period. The adjustments related to income and deferred taxes appear to moderate reported figures, particularly in the earlier years, while the latter years show greater alignment between reported and adjusted data. The transient dip in equity and net income around 2021 deserves further exploration but is followed by positive trends, suggesting recovery and growth.

Net Profit Margin

The reported net profit margin exhibited a decline from 11.06% in 2020 to 9.12% in 2022, followed by a recovery to 11.61% by 2024. The adjusted net profit margin showed a similar trend but remained consistently lower than the reported figures, declining from 10.27% in 2020 to 8.47% in 2022, then increasing to 11.28% in 2024. This pattern indicates a period of margin compression followed by an improvement in profitability.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios increased from 0.90 in 2020 to peak around 1.00 by 2023. The reported turnover slightly decreased to 0.98 in 2024, while the adjusted turnover mirrored the same decline after a slight increase to 1.01 in 2023. This suggests a stable efficiency in asset utilization with minor fluctuations in the later periods.

Financial Leverage

Reported financial leverage showed notable volatility, rising sharply from 5.65 in 2020 to 8.48 in 2021, then steadily decreasing to 5.83 by 2024. Adjusted financial leverage followed a similar pattern but continued at lower levels, increasing from 4.63 in 2020 to 6.56 in 2021, then declining to 5.13 in 2024. The decreasing trend after 2021 points to a gradual deleveraging or reduced reliance on debt financing over the latter years.

Return on Equity (ROE)

Reported ROE experienced significant increase in 2021 (76.5%) up from 56.23% in 2020, then decreased to approximately 64% in subsequent years before rising slightly to 66.19% in 2024. Adjusted ROE followed a comparable trend with generally lower values, starting at 42.95% in 2020, rising to 56.77% in 2021, and stabilizing around the mid-50% range by 2024. This indicates improved equity profitability in 2021 followed by a normalization in later periods.

Return on Assets (ROA)

The reported ROA declined from 9.95% in 2020 to 8.94% in 2022 before increasing significantly to 11.35% in 2024. Adjusted ROA followed a similar trajectory but remained slightly lower, moving from 9.27% in 2020 to a low of 8.33% in 2022 and rising to 11.06% in 2024. The rise in ROA in the last two years reflects an enhanced capability to generate profits from asset investments.

Overall Insights

The company experienced a temporary dip in profitability and efficiency metrics around 2021 and 2022, as shown by declining net profit margins and returns. This period also featured elevated financial leverage, which may have influenced the financial risk profile. Subsequent years demonstrate a recovery trend across profitability, efficient asset use, and deleveraging, contributing to improved overall financial performance by 2024. The adjusted figures, accounting for income tax effects, consistently show more conservative estimates but closely track the same underlying trends.

The financial data reveals several notable trends regarding net income and profit margins over the analyzed five-year period.

Reported Net Income

The reported net income displayed a decrease from 2,030,400 thousand US dollars in 2020 to 1,864,400 thousand US dollars in 2021. Subsequently, it rose moderately in 2022 to 2,020,100 thousand US dollars. This upward trajectory continued more significantly in the following years, reaching 2,388,800 thousand US dollars in 2023 and peaking at 2,681,400 thousand US dollars in 2024.

Adjusted Net Income

The adjusted net income similarly experienced a decline from 1,885,100 thousand US dollars in 2020 to 1,784,100 thousand US dollars in 2021. It then gradually increased to 1,875,300 thousand US dollars in 2022, followed by a more pronounced rise to 2,299,900 thousand US dollars in 2023 and further to 2,606,500 thousand US dollars in 2024. This pattern closely mirrors that of the reported net income but consistently shows slightly lower figures, reflecting adjustments made for deferred income taxes or other factors.

Reported Net Profit Margin

The reported net profit margin declined from 11.06% in 2020 to 9.35% in 2021 and decreased slightly further to 9.12% in 2022. However, it improved noticeably in the years 2023 and 2024, reaching 10.36% and 11.61%, respectively. This suggests an initial reduction in profitability followed by a rebound to levels exceeding those seen at the start of the period.

Adjusted Net Profit Margin

The adjusted net profit margin experienced a similar decline from 10.27% in 2020 to 8.95% in 2021 and further to 8.47% in 2022. It then recovered to 9.98% in 2023 and improved significantly to 11.28% in 2024. These adjusted margins consistently remain below the reported profit margin values but follow the same trends, indicating that adjustments affect profitability measures without altering the overall positive trend in recent years.

Overall, the data illustrates a dip in both income and profit margins in the early part of the analyzed period, likely reflecting challenges faced during those years. The recovery and subsequent growth in both reported and adjusted metrics in 2023 and 2024 indicate improving profitability and efficient management of income tax adjustments. The increasing gap between reported and adjusted figures, while relatively stable proportionally, highlights the importance of considering tax effects when evaluating financial performance.

The financial data indicates a steady increase in both reported and adjusted total assets over the five-year period. Reported total assets grew from approximately 20.4 billion US dollars at the end of 2020 to about 23.6 billion US dollars by the end of 2024. Adjusted total assets followed a similar trajectory, increasing from roughly 20.3 billion to 23.6 billion US dollars during the same timeframe, with reported values consistently slightly higher than adjusted ones.

Total asset turnover ratios, both reported and adjusted, show a general upward trend from 2020 to 2023, suggesting improved efficiency in asset utilization. Specifically, the reported total asset turnover rose from 0.9 in 2020 to 1 in 2023, then experienced a slight decline to 0.98 in 2024. Adjusted total asset turnover closely mirrors this pattern, increasing from 0.9 to 1.01 by 2023, followed by a modest decrease to 0.98 in 2024.

Asset Growth

Both reported and adjusted total assets increased steadily, reflecting potential investments, acquisitions, or organic growth. The consistent gap between reported and adjusted totals suggests minor adjustments primarily related to income tax considerations.

Asset Turnover Efficiency

The rise in total asset turnover ratios until 2023 indicates improving efficiency in generating sales from the asset base. The subsequent small decline in 2024 might imply stabilization or slight weakening in asset productivity.

Comparison Between Reported and Adjusted Figures

The close alignment between reported and adjusted figures across both assets and turnover ratios implies that deferred income tax adjustments have a limited impact on the overall financial performance metrics during this period.

Total Assets

Both reported and adjusted total assets exhibit a consistent upward trend over the five-year period from 2020 to 2024. Reported total assets increased from approximately $20.4 billion in 2020 to about $23.6 billion in 2024, reflecting steady growth. Adjusted total assets closely mirror this pattern, rising from $20.3 billion to $23.6 billion, indicating that adjustments for deferred income taxes have a relatively minor impact on total asset values.

Shareholders' Equity

Shareholders’ equity shows more volatility but generally trends upward. Reported shareholders’ equity declined sharply from $3.61 billion in 2020 to $2.44 billion in 2021, before recovering steadily to reach $4.05 billion by 2024. The adjusted shareholders’ equity follows a similar pattern but starts higher at $4.39 billion in 2020, decreases to $3.14 billion in 2021, and rises consistently thereafter to $4.59 billion in 2024. This suggests that deferred tax adjustments significantly affect equity figures, particularly noted in the sharper decline and subsequent recovery in 2021.

Financial Leverage

Financial leverage, calculated as the ratio of total assets to shareholders’ equity, decreases overall during the period. Reported financial leverage peaks at 8.48 in 2021, following the dip in reported equity, and then declines to 5.83 by 2024. Adjusted financial leverage similarly reaches a high of 6.56 in 2021 and falls to 5.13 by 2024. The lower leverage ratios after 2021 suggest improved equity capitalization relative to assets, indicating a strengthening financial structure over the recent years.

Summary

The data reveals sustained growth in total assets accompanied by recovery and strengthening of shareholders’ equity, particularly after a notable setback in 2021. Adjusted figures, accounting for deferred income taxes, are systematically higher for equity and lower for leverage, reflecting the impact of tax-related accounting adjustments. The decline in financial leverage ratios over time points toward a more balanced capital structure, reducing reliance on debt or liabilities relative to equity. These trends collectively suggest an improving financial position characterized by asset growth and enhanced equity base over the evaluated period.

Net Income Trends

The reported net income exhibits a generally upward trend from 2,030,400 thousand USD in 2020 to 2,681,400 thousand USD in 2024, presenting a slight dip in 2021 before recovering in subsequent years. The adjusted net income follows a similar pattern, rising from 1,885,100 thousand USD in 2020 to 2,606,500 thousand USD by 2024, also showing a modest decrease in 2021 relative to 2020. Overall, both reported and adjusted net incomes demonstrate growth over the five-year period, with adjusted net income consistently lower than reported figures, indicating the impact of tax and other adjustments.

Shareholders’ Equity Evolution

Reported shareholders’ equity shows volatility, declining sharply from 3,610,800 thousand USD in 2020 to 2,437,200 thousand USD in 2021, before rising steadily to 4,051,200 thousand USD in 2024. In comparison, adjusted shareholders’ equity starts at 4,389,300 thousand USD in 2020, decreases to 3,142,600 thousand USD in 2021, and then grows more consistently to reach 4,591,200 thousand USD in 2024. The adjusted equity values remain consistently higher than the reported amounts, illustrating the positive effect of adjustments over the period.

Return on Equity Analysis

Reported Return on Equity (ROE) peaks at 76.5% in 2021, marking the highest value during the period, then declines to 64.29% in 2023 before increasing slightly to 66.19% in 2024. Adjusted ROE follows a similar trajectory but with lower percentages, ranging from 42.95% in 2020, rising to 56.77% in 2021, then decreasing to around 50.59% in 2022 and stabilizing above 53% in the following years. The adjusted ROE figures consistently demonstrate a more conservative profitability measure, reflecting the impact of tax adjustments on shareholder returns.

Overall Insights

The company exhibits a pattern of increasing profitability and equity over the evaluated years, with 2021 representing a year of contraction in equity but a high point in ROE. The adjusted figures, which account for deferred income tax effects, provide a more tempered view of financial performance and returns. Despite fluctuations, both reported and adjusted metrics suggest strengthening financial positions leading into 2024. The divergence between reported and adjusted data underscores the material influence of income tax adjustments on reported financial outcomes.

Net Income Trends

The reported net income exhibits a fluctuating but overall upward trend over the five-year period. It decreased from 2,030,400 thousand US dollars in 2020 to 1,864,400 thousand in 2021, rebounded slightly in 2022 to 2,020,100 thousand, and then showed significant growth in 2023 and 2024, reaching 2,681,400 thousand.

The adjusted net income follows a similar pattern, starting at 1,885,100 thousand US dollars in 2020, dipping to 1,784,100 thousand in 2021, and then steadily increasing through 2022 to 2,605,500 thousand by 2024. The adjustments appear to consistently lower the net income figures compared to the reported amounts but maintain a similar trend trajectory.

Total Assets Analysis

The reported total assets show consistent growth year over year, beginning at 20,401,600 thousand US dollars in 2020 and increasing to 23,632,600 thousand by 2024. This represents a steady expansion of asset base over the period.

The adjusted total assets closely mirror the reported figures, with a slight downward adjustment in each period. From 20,334,000 thousand US dollars in 2020, adjusted assets rise steadily to 23,565,100 thousand in 2024, indicating that the asset base retains its growth trajectory even after adjustments.

Return on Assets (ROA)

The reported ROA shows an initial decline from 9.95% in 2020 to 8.94% in 2022, indicating reduced efficiency or profitability relative to assets during this period. However, a marked improvement occurs in 2023 and 2024, with ROA increasing to 11.35% in 2024, suggesting enhanced asset utilization or profitability.

The adjusted ROA follows a comparable pattern, though consistently lower than the reported ROA. It decreases from 9.27% in 2020 to a low of 8.33% in 2022, then rises significantly to 11.06% in 2024. This trend points to improved operational efficiency after adjustments in the most recent years.

Overall Insights

The data indicates a period of initial decline or stagnation in both profitability and efficiency up to 2021–2022, followed by a strong recovery and growth phase through 2023 and 2024. Total assets demonstrate steady growth throughout, implying ongoing investment or asset accumulation. The gap between reported and adjusted figures suggests consistent adjustments that moderately reduce profitability measures and asset values but do not fundamentally alter trend directions. The significant improvement in ROA in the later years highlights enhanced profitability relative to the asset base, potentially reflecting more effective management or favorable market conditions.