On Nov 21, we retained our Neutral recommendation on
The Valspar Corporation
). While the paints and coatings maker should benefit from new
business wins, acquisitions and effective cost management, we
remain on the sidelines given weakness in general industrial
markets and uncertain demand environment.
Both revenues and adjusted earnings for fourth-quarter fiscal
2013 (ended Oct 25, 2013), reported on Nov 19, beat Zacks
Consensus Estimates. However, profit slipped year over year on
hefty restructuring charges. Valspar saw higher sales across its
paints and coatings businesses in the quarter. The company
expects accelerated revenues and earnings gains in fiscal
Valspar, a Zacks Rank #3 (Hold) stock, has a strong pipeline
of new products and significant opportunities for share gains in
both its Paint and Coatings segments. It continues to see
strength in its coatings business as evidenced by new business
wins. Valspar's fastest growing markets are the emerging
Winning new businesses remain a company-wide focus that will
position Valspar well for the future and help offset lower demand
in some of its core markets. The acquisition of Italy-based
industrial coatings maker Inver Holding S.r.l. represents a
significant move and reinforces Valspar's position in the $6
billion European industrial coatings market.
Valspar should also benefit from its restructuring actions in
fiscal 2014. The company is managing its cost well and
maintaining a cost structure that is appropriate for the current
external environment. Valspar also remains committed to boost
shareholder return leveraging healthy cash flows.
However, we are wary about weakness in general industrial
markets. Valspar continues to see weak coatings demand for
general industrial products, mainly for off-road equipment,
pipelines and shipping containers. Moreover, its paint business
in Australia continues to be impacted by a weak non-residential
construction market. Weakness across these markets may sustain
into fiscal 2014.
We also account for volatility in raw material costs. Valspar
has experienced disruptions in supplies of certain raw materials
at various times, impacting its ability to manufacture
Other Stocks to Consider
Other companies in the specialty chemical space with favorabe
Zacks Rank are
RPM International Inc.
Minerals Technologies Inc.
). All of them hold a Zacks Rank #2 (Buy).
FERRO CORP (FOE): Free Stock Analysis Report
MINERAL TECH (MTX): Free Stock Analysis
RPM INTL INC (RPM): Free Stock Analysis
VALSPAR CORP (VAL): Free Stock Analysis
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