Sherwin-Williams and Donaldson: Two Income Stocks Diverge

A pair of income stocks in the same list are heading in very different directions. Sherwin-Williams (NYSE:SHW) just took a fresh round of analyst price-target cuts as the housing market softens and raw material costs stay elevated. Donaldson Company (NYSE:DCI) just reported a record quarter on sales, operating margin, and adjusted earnings per share. For anyone building an income watchlist, the contrast matters.

Take Sherwin-Williams first. On June 4, BMO Capital lowered its price recommendation to $355 from $420, keeping an Outperform rating. The firm cited a tougher macroeconomic backdrop, continued pressure from elevated raw material costs, and a weaker housing market that reduces the likelihood of a meaningful recovery in fiscal 2026 and 2027. A few days later, on June 8, Berenberg analyst Aron Ceccarelli cut his price target to $380 from $400 after meetings with the company's management team. He kept a Buy rating. The paint-and-coatings giant generates most of its business in the Americas, with a customer base split between professional, industrial, commercial, and retail buyers. The housing slowdown is a direct headwind for the professional segment, which relies on new construction and renovation activity. The company's valuation has already come under pressure as the cycle shifts, as we covered in Sherwin-Williams (SHW) Valuation at Risk as Housing Slows.

Donaldson tells a different story. The filtration-solutions company reported fiscal third-quarter results that beat expectations. CEO Richard Lewis called it the strongest quarter in the company's history based on sales, adjusted operating margin, and adjusted earnings per share. Total sales rose 6% year over year. Adjusted EPS increased 7% to $1.06. Operating margin reached 16.6%, up 30 basis points from a year earlier and another company record. CFO Brad Pogalz reported the numbers on the earnings call. Lewis also said Donaldson closed the final two facilities under its footprint optimization program and has shifted focus to increasing production at the locations. After the quarter ended, the company completed its acquisition of Facet Filtration, a deal that strengthens its position in the aftermarket business – about 70% of Facet's revenue comes from recurring sales of regulated replacement parts with attractive margins. Donaldson operates three segments: Mobile Solutions, Industrial Solutions, and Life Sciences.

The divergence between these two income stocks comes down to end-market exposure. Sherwin-Williams is tied to housing and construction, both facing rate-driven slowdowns. Donaldson's filtration products serve a broader industrial and life-sciences base, with a growing aftermarket annuity stream from the Facet deal. The analyst actions reflect that: BMO and Berenberg both trimmed SHW estimates, while Donaldson just beat and raised.

Among the other names on the same list, Oracle (NYSE:ORCL) carries an Alpha Score of 41, and Gilead Sciences (NASDAQ:GILD) sits at 50 – both in Mixed territory. Their stock pages at ORCL stock page and GILD stock page offer further detail. For now, the two stocks with the most concrete catalyst flow are SHW and DCI. One is facing headwinds that will take time to clear. The other is running at a record.

Donaldson management said the quarter was in line with expectations after a weaker second quarter. The Facet acquisition closed after the period, so the next report will show the first full quarter with the deal included.