We are retaining our Neutral recommendation on
The Valspar Corporation
) following its mixed third-quarter fiscal 2012 results. Adjusted
earnings of 97 cents a share edged past the Zacks Consensus
Estimate of 96 cents. Sales inched up 0.7% year over year to
$1,078.3 million, falling behind the Zacks Consensus Estimate of
PPG INDS INC (PPG): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis
VALSPAR CORP (VAL): Free Stock Analysis Report
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Valspar, the sixth largest paint and coatings manufacturer
globally, 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
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 external
environment. It is also making good progress in restoring its
operating margins through pricing and improved productivity.
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 sees a challenging fourth quarter as it expects
sluggish growth in North America and sustained weakness in some
overseas markets, especially China.
We 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
Moreover, Valspar's paint segment recorded tepid growth in the
third quarter. The segment's growth has been stymied by weakness in
the residential housing market in Australia. We feel that a soft
Australian residential housing market may continue to hurt paint
sales moving ahead.
Valspar, which competes with
Sherwin Williams Company
PPG Industries Inc.
), currently retains a short-term Zacks #3 Rank (Hold).