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Barron's Christopher C. Williams can't understand why shares of Sherwin Williams (NYSE:SHW) are down only 1% over the past 12 months - even as the housing market collapsed.

Williams (the author) says investors are overlooking SHW's near-term challenges. Sales of the company's pricey brands, such as Sherwin-Williams, Dutch Boy and Pratt & Lambert, are already down sharply, and analysts expect demand to remain weaker for most of the year, even from do-it-yourselfers. SHW's margins are also being squeezed by high raw-materials costs. CEO Christopher Connor recently admitted that "the catalyst for recovery is simply nowhere in sight."

Shares trade for 15x 2009 earnings, well above SHW's trough of 10.5, and richer than rivals like PPG Industries (NYSE:PPG), RPM (NYSE:RPM) and Valspar (NYSE:VAL) at about 12x.

Bulls like SHW's solid balance sheet and strong cash flow; its 30-year history of dividend increases (current yield 2.8%); and say there are signs housing may be bottoming. Maybe, but the likelihood of a spirited rebound this year seems close to nil. S&P rates shares ($53.55) Sell with a price target of $44; and Longbow analyst Dmitry Silversteyn says his $0.15 EPS estimate (vs. Street $0.21) may still be too high, noting continuing weakness in contractor demand.

SHW is scheduled to report Thursday.

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Given the dearth of companies sticking to - and increasing - dividends, David I. Templeton isn't surprised SHW is demanding a premium.

Meanwhile, Herb Morgan thinks stabilizing housing numbers may soon ignite a short squeeze in homebuilder and housing stocks.

Source: Sherwin Williams Is In For a Shellacking - Barron's