Paint maker Valspar CorporationVAL is raising packaging prices in the Americas and Europe. This will help to offset a significant rise in raw material costs. Details of the price increases will be communicated to customers directly. The hike is effective Apr 1 or as contracts permit.
The company has witnessed a number of planned and unplanned outages in upstream supply markets, some of which have resulted in force majeure announcements. Also, increased crude oil prices , production issues and force majeure in some feedstock markets as well as continued push for environmental and safety regulations have led to higher feedstock prices for major commodity chemicals. This in turn has increased raw material prices.
Valspar's shares rose 4.2% in the past three months, underperforming the Zacks categorized Paints and Allied Products industry's gain of 7.4%.
Valspar continues to progress by winning new businesses, diversified product portfolio and expansion actions. Moreover, the company is set to be acquired by Sherwin-Williams SHW in a deal worth roughly $11.3 billion. The planned merger is expected to create around $280 million in annual synergies within two years of the closure of the deal. Also, Valspar is taking measures to lower its cost structure and increase operational efficiency.
However, the company recorded lower profits in first-quarter fiscal 2017. Adjusted earnings for the quarter missed the Zacks Consensus Estimate.
Valspar is exposed to currency headwinds, stemming from a stronger U.S. dollar. Foreign exchange translation had an unfavorable impact on its overall sales in first-quarter fiscal 2017 and affected sales across its coatings and paints businesses.
Valspar also continues to witness irregular demand trends across its end markets and weakness for some of its products in overseas markets. Coatings demand for general industrial products remains somewhat soft. The company is also seeing weak sales for its consumer paints product lines in China and Australia and its automotive refinish product line globally as witnessed in the most recent quarter.
Valspar Corporation (The) Price and Consensus
Valspar currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Better-ranked companies in the construction space include Louisiana-Pacific Corporation LPX and Boise Cascade, L.L.C. BCC both sporting Zacks Rank#1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Louisiana-Pacific Corp has an expected long-term growth of 5%.
Boise Cascade has an expected long-term growth of 16.2%.
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