We have retained our Neutral recommendation on paint and
) following our assessment of its first-quarter fiscal 2013
results. We remain cautious given the uncertain demand
Both revenues and earnings for the first quarter missed the
Zacks Consensus Estimates, hurt by weak market conditions. The
company cut its earnings forecast for fiscal 2013 citing a soft
demand environment across some overseas markets.
Valspar continues to see strength in its coatings business as
evidenced by new business wins. It 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 is managing its cost well and maintaining a cost
structure that is appropriate for the current external
environment. 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 economies. Valspar also remains committed to
boost shareholder return leveraging healthy cash flows.
However, Valspar's paint segment had a weak first quarter,
partly due to depressed demand in overseas markets. The segment's
growth has been hurt by a weak residential housing market in
Australia, which may continue to affect sales moving ahead. The
overall demand environment is expected to be uneven in fiscal
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
Valspar currently carries a short-term (1 to 3 months) Zacks
Rank #3 (Hold).
Other Stocks to Consider
Other companies in the specialty chemicals industry with
favorable Zacks Rank are
). While both Novozymes and Penford hold a Zacks Rank #1
(Strong Buy), Chemtura carries a Zacks Rank #2 (Buy).
CHEMTURA CORP (CHMT): Free Stock Analysis
NOVOZYMES A/S (NVZMY): Get Free Report
PENFORD CORP (PENX): Free Stock Analysis
VALSPAR CORP (VAL): Free Stock Analysis
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