Valspar Opens R&D Center in China - Analyst Blog

Valspar Corporation ( VAL ) announced that it has opened a new research and development (R&D) center at Shunde, China. The Valspar Applied Science and Technology Center will employ over 200 scientists to support and sustain the growth of Valspar in the Asia/Pacific region and its research and development efforts worldwide.

The Minneapolis-based coating company launched the center with a grand opening that drew more than 400 customers, suppliers, government officials and other guests.

This facility will aim at introducing a higher level of value to the company's relationships in the Asia Pacific region by bringing it closer to its customers. The research and development center will give its customers a unique competitive edge. Valspar's strategy is to continue to invest in its people and businesses in China.

In November 2011, Valspar's net earnings rose 50% to 84 cents in the fourth quarter of 2011 from last year's 56 cents, exceeding the Zacks Consensus Estimate of 70 cents. Adjusted net earnings excluded non-cash impairment charge of $3.82 per share for goodwill and intangibles associated with the company's wood coatings and gelcoat product lines and a $0.13 per share restructuring charge.

Including the after-tax non-cash impairment charge of $363.4 million, the reported net loss for the fourth quarter of 2011 was $295.7 million or $3.18 per share.

Quarterly sales jumped 19.4% year over year to $1.05 billion, driven by new business efforts, pricing and productivity, offsetting rising raw material costs and challenging market conditions.

Sales in Valspar's Coatings segment increased 13.9% year over year to $566.2 million and sales in the Paints segment shot up $416.3 million, up 24.0% from the prior-year quarter. Sales from inter-segment business inched up 2.61% year over year to $64.8 million.

Gross margin decreased to 31.8% in the reported quarter versus 33.1% in the comparable year-ago quarter.

Though the global economy outlook is unclear, Valspar expects its sales to benefit from the diverse mix of businesses and growth in fast-growing coatings markets in Asia and Latin America. The company has a strong pipeline of new products and significant opportunities for share gains in both its Paint and Coatings segments globally.

The company expects to benefit from its restructuring actions while maintaining its operational and pricing discipline. Valspar currently forecasts fiscal 2012 adjusted net income per share in the range of $2.87 to $3.07, which will be its fourth consecutive year of double-digit earnings growth.

Valspar's solid results and robust margin gains in the past few quarters stem from its cost reduction efforts, increasing product prices and productivity gains. We are more optimistic about Valspar's long-term performance, which is likely to be driven by volume increases in both the Paint and Coatings categories.

Valspar competes with the likes of Sherwin Williams Company ( SHW ) and PPG Industries Inc. ( PPG ).

We maintain our Neutral recommendation on Valspar with a short-term Zacks #2 Rank (Buy) on the stock.

PPG INDS INC ( PPG ): Free Stock Analysis Report

SHERWIN WILLIAM ( SHW ): Free Stock Analysis Report

VALSPAR CORP ( VAL ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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