Leading paint and coatings maker
The Valspar Corporation
) third-quarter fiscal 2013 (ended Jul 26, 2013) adjusted
earnings (barring nonrecurring items) of $1.07 per
share missed the Zacks Consensus Estimate of $1.11 per share, but
improved from the year-ago quarter earnings of 97 cents per
share. Profit, as reported, rose 8.6% year over year to $93.8
million or $1.04 a share.
Net sales edged up 1% year over year to $1,089 million in the
reported quarter, missing the Zacks Consensus Estimate of $1,136
million. The results lagged expectations due to continued
macro-economic headwinds in key general industrial market
segments and certain international regions.
However, Valspar continued its strong performance in the U.S.
where volumes increased in double digits, driven by growth in
consumer paints, packaging, coil and wood product lines. Valspar
logged a 7% gain in overall volumes in the quarter.
Revenues from Valspar's Coatings unit edged up 1% year over year
to $573 million as increases across packaging, wood product lines
were masked by lower demand for general industrial products,
mainly in the coatings for off-road equipment and shipping
However, sales from the Paints segment rose 3% to $455 million in
the quarter on strength in China and double-digit volume gain in
Margins and Expenses
Gross margin (as reported) rose slightly to 33.9% in the reported
quarter from 33.8% a year ago. Adjusted gross margin slipped to
34.1% from 34.2% in the prior-year quarter. Operating expenses
fell 3.5% year over year to $213.8 million, helped by lower
selling, general and administrative costs and restructuring
charges. Operating expenses (as a percentage of sales) were
19.6%, down from 20.5% a year ago.
Sound Balance Sheet
Valspar maintained a healthy balance sheet with cash and cash
equivalents rising 92.4% year over year to $349.2 million at the
end the quarter. Total long-term debt declined 3.8% year over
year to roughly $1,016.2 million.
Valspar narrowed its adjusted earnings forecast for fiscal
2013 and now expects it to be in the range of $3.45 to $3.55 per
share, down from the earlier forecast of $3.60 to $3.80 per
share. The lower adjusted earnings forecast was based on the
third quarter results and the anticipated impact of continued
Valspar has a strong pipeline of new products and significant
opportunities for share gains in both its Paint and Coatings
segments globally. The company should also benefit from its
restructuring actions while maintaining its operational and
pricing discipline. We are optimistic about Valspar's long-term
performance, which is likely to be driven by volume increases in
both the paint and coatings categories .However, we are concerned
about the irregular demand trends across its end markets and
weakness for some of its products in overseas markets.
Valspar currently retains a Zacks Rank #3 (Hold).
Other companies in the specialty chemical space with favorabe
Zacks Rank are
Sensient Technologies Corporation
KMG Chemicals Inc.
). While Ferro holds a Zacks Rank #1 (Strong Buy), both Sensient
Technologies and KMG retain a Zacks Rank #2 (Buy).
FERRO CORP (FOE): Free Stock Analysis Report
KMG CHEMICALS (KMG): Free Stock Analysis
SENSIENT TECH (SXT): Free Stock Analysis
VALSPAR CORP (VAL): Free Stock Analysis
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