We are maintaining our Neutral recommendation on
The Valspar Corporation
) following our assessment of its mixed fourth-quarter fiscal
2012 results. Adjusted earnings of 86 cents beat the Zacks
Consensus Estimate by a penny. Sales edged down roughly 2% year
over year to $1.02 billion and missed the Zacks Consensus
Estimate of $1.08 billion.
Valspar, the sixth largest paint and coatings manufacturer
globally, continues to see strength in its coatings business as
evidenced by higher volumes, new business wins and market share
gains. While the company expects the overall demand environment
to be uneven moving ahead, it envisions a double-digit growth in
earnings in fiscal 2013.
Valspar, which competes with
Sherwin Williams Company
PPG Industries Inc.
), has a strong pipeline of new products and significant
opportunities for share gains in both its Paint and Coatings
segments. The company should also benefit from its restructuring
actions in fiscal 2013.
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 is managing its cost well and
maintaining a cost structure that is appropriate for the current
Winning new businesses also remain a company-wide focus that will
position Valspar well for the future and help offset lower demand
in core markets. Its fastest growing markets are the emerging
However, Valspar's Paint segment had a weak fourth quarter. The
segment's growth has been hurt by a weak residential housing
market in Australia, which may continue to affect sales moving
We also remain concerned about cost pressures associated with raw
material inflation. Raw material costs have been volatile and
Valspar has experienced disruptions in supplies of certain raw
materials at various times, impacting its ability to manufacture
Our recommendation on the stock is in agreement with a short-term
Zacks #3 Rank (Hold).
PPG INDS INC (PPG): Free Stock Analysis
SHERWIN WILLIAM (SHW): Free Stock Analysis
VALSPAR CORP (VAL): Free Stock Analysis
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