Supply chain issues may be too much for Sherwin Williams ' stock to overcome in the first months of 2022, according to Wells Fargo. The paint company announced preliminary fourth-quarter earnings results on Friday, with CEO John Morikis saying in a statement that supply chain and labor issues caused the company to miss earnings guidance. Shares fell 2.8% on Friday and were off another 2.1% in premarket trading Tuesday. Wells Fargo analyst Michael Sison downgraded the stock to equal weight from overweight, saying in a note to clients Monday evening that the company likely will struggle in the coming months before rebounding later in the year. "While raw material inflation/availability headwinds and Covid-19-related labor issues look to be firm negatives well into 1Q22E, we are encouraged that sales and pricing trends remain positive. We expect SHW will generate positive EPS growth in 2022E driven by strong pricing and as headwinds moderate, though we believe the growth will be backend-loaded as we do not expect relief from raw material costs any time soon," Sison wrote. Even though Sherwin Williams said that underlying demand remains strong, the fourth-quarter miss means that some investors may be spooked away from the stock for a while, Wells Fargo said. "We believe it will take time to restore confidence in its quarterly earnings cadence to drive more attractive upside," the note said. Wells Fargo cut its price target on Sherwin Williams to $335 per share from $380. The new target is 8.6% above where the stock closed Friday. -CNBC's Michael Bloom contributed to this report.
A customer leaves a Sherwin-Williams Co. store
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Supply chain issues may be too much for Sherwin Williams' stock to overcome in the first months of 2022, according to Wells Fargo.