We are maintaining our Outperform recommendation on
The Valspar Corporation
(
VAL
), the sixth largest paint and coatings manufacturer globally. Its
second-quarter fiscal 2012 earnings of 84 cents a share topped the
Zacks Consensus Estimate by 3 cents.
Revenues rose 4% year over year to $1,032.6 million led by
higher sales from the Minnesota-based company's Coating segment.
However, sales fell short of the Zacks Consensus Estimate.
The company witnessed improved margins in the quarter, supported
by pricing, better productivity and synergies from restructuring.
Valspar raised its earnings forecast for 2012 based on volume gains
and effective cost management.
Valspar expects sales to benefit from the diverse mix of
businesses and growth in the fast growing coatings markets in Asia
and Latin America. The company has delivered solid earnings gains
over the last few quarters, backed by increasing product prices,
aggressive cost reductions and productivity gains.
Valspar is managing its cost well and maintaining a cost
structure that is appropriate for the current external environment.
It is making good progress in restoring its operating margins
through pricing and improved productivity.
Valspar continues to make progress by way of winning new
businesses. Its fastest-growing markets are the emerging economies,
such as China. Winning new businesses is a company-wide focus that
will position it well for the future and help offset lower demand
in core markets.
We believe Valspar has a strong pipeline of new products and
significant opportunities for share gains across its Paint and
Coatings segments globally. The company is expected to benefit from
its restructuring actions while maintaining its operational and
pricing discipline.
We are more optimistic on Valspar's long-term performance, which
is likely to be driven by volume increases in both the Paint and
Coatings categories. New business wins and gradually improving
domestic industrial markets are expected to support volume growth
in the coatings franchise. The company's paint business is expected
to benefit from expanded traction of products aimed at the
affordable housing market in China.
Valspar competes with the likes of
Sherwin Williams Company
(
SHW
) and
PPG Industries Inc.
(
PPG
). Our recommendation on the stock is supported by a short-term
Zacks #2 Rank (Buy).
PPG INDS INC (PPG): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis
Report
VALSPAR CORP (VAL): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research