Shares of The Valspar Corporation (VAL) touched a new 52-week high of $77.48 on Jul 3, before closing the trading session marginally lower at $77.08.
The Minneapolis-based company has a market cap of roughly $6.4 billion, and its average volume of shares traded over the last three months is around 436.7K.
What’s Driving Valspar Up?
Valspar’s revenues and adjusted earnings for the second quarter of fiscal 2014 (ended Apr 25, 2014) beat Zacks Consensus Estimates. Revenues and profit rose on strength across the company’s paints and coatings businesses and contributions from acquisitions.
Valspar, a Zacks Rank #2 (Buy) stock, continues to make progress by way of winning new businesses. In January 2013, the company acquired the paint manufacturing assets from Ace Hardware Corporation. The acquisition will boost its retail foothold in the U.S. and offer incremental revenues from the sale of Ace-branded paints. The company is making good progress with the integration of the acquired business and now has over 3,000 Ace stores with Valspar products.
Valspar also closed its acquisition of Italy-based industrial coatings maker Inver Holding S.r.l in August 2013. The acquisition is in sync with Valspar’s growth strategy for its industrial coatings business and is expected to reinforce its position in the $6 billion European industrial coatings market and offer operational synergies. Valspar will leverage Inver’s strong product portfolio, leading technology and distribution network to better serve its customers in Europe.
Valspar’s fastest-growing markets are emerging economies, such as China. Overall, winning new businesses is a company-wide focus that will position it well for the future and help offset lower demand in core markets. The company expects to gain from new businesses in consumer paints, packaging, coil and wood coatings in fiscal 2014.
Valspar initiated measures to lower its cost structure and increase the efficiency of its operations. It anticipates realizing substantial savings from its restructuring efforts in fiscal 2014. Its restructuring actions are primarily aimed at improving manufacturing capabilities in North America following the buyout of Ace Hardware’s assets.
In May 2014, Valspar jointly announced with Lowe's the launch of Valspar Reserve interior and exterior paints, which are available exclusively at Lowe's. Valspar Reserve outperforms competitive products at similar price points based on attributes that matter most to consumers.
The launch of Valspar Reserve provides the opportunity to grow sales by attracting shoppers who value the benefits of a super premium paint and also to build on Valspar’s premium brand image with consumers. The company is increasing its year-over-year investments in advertising to support Valspar Reserve with Lowe's and grow the Valspar brand in general.
Key Picks from the Sector
Other companies in the specialty chemicals space worth considering include KMG Chemicals Inc. (KMG), Minerals Technologies Inc. (MTX) and The Sherwin-Williams Co. (SHW). While KMG Chemicals and Minerals Technologies sport a Zacks Rank #1 (Strong Buy), Sherwin-Williams holds a Zacks Rank #2 (Buy).