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Valspar (VAL) Beats Earnings & Revenue Estimates, Ups View

Zacks Equity Research

Valspar’s (VAL) saw higher profits in third-quarter fiscal 2014 (ended Jul 25, 2014) on continued momentum across its coatings businesses, higher volumes and strong performance from China and Europe. Its profit, as reported, moved up around 4.3% year over year to roughly $97.8 million or $1.14 a share.

Valspar, which is one of the prominent paint makers along with Akzo Nobel (AKZOY), PPG Industries (PPG) and Sherwin-Williams (SHW), lagged earnings, barring restructuring charges, of $1.21 per share for the quarter. Earnings topped the Zacks Consensus Estimate of $1.16 per share and exceeded the year-ago quarter’s adjusted earnings of $1.07 per share.

Revenues rose roughly 10.5% year over year to $1,203 million in the reported quarter on gains across Paints and Coatings divisions. Revenues also came ahead of the Zacks Consensus Estimate of $1,189 million.


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Segment Highlights

Sales from Valspar’s larger Coatings division rose 16% year over year to $666 million in the quarter due to contributions from General Industrial (including Inver) and volume gains in packaging coatings, wood coatings and coil. Gains were witnessed in packaging product line driven by market share gains and momentum at the company’s non-BPA products.

Paints segment's revenues moved up 4% to $474 million on volume gains across China and Australia. Sales in the U.S. rose in the low single-digits and were impacted by shipments made in the previous quarter to support the launch of new retail programs in both the home improvement and hardware channels.

Margins and Expenses

Gross margin (as reported) improved to 34.6% in the reported quarter from 33.9% a year ago. Operating expenses went up 20.8% year over year to $258.2 million.


Valspar ended the quarter with cash and cash equivalents of $146.5 million, down around 58% year over year. Total long-term debt rose 6.5% year over year at $1,077.9 million.

Valspar repurchased around 1.1 million shares during the reported quarter for $81 million.


Valspar, a Zacks Rank #3 ( Hold) stock, now expects sales growth for fiscal 2014 to be about 9% versus its previous guidance of 7% to 9%. The company also raised the lower end of its adjusted earnings guidance for the year and now expects it in the range of $4.05 to $4.15 per share, compared with its previous guidance of $3.95 to $4.15 per share.

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