Valspar Corp. (VAL) reached a new 52-week high of $74.24 on May 22, above its previous high of $74.11. The leading paints and coatings maker, which has a market cap of roughly $6.5 billion, has seen its share rise roughly 18% year-to-date. Average volume of shares traded over the last three months is around 568K.
Valspar’s shares broke above its 200-day moving average in Nov 2011 and continue trade above it, manifesting the bullish trend. It has outperformed the S&P 500 over the past year and has clocked a return of roughly 54% for the period versus around 28% for the benchmark.
What’s Driving Valspar Up?
Valspar’s shares are screaming higher, hitting new highs following the release of its second-quarter fiscal 2013 (ended Apr 26, 2013) results that showed a rebound in its paint business.
Adjusted earnings for the second quarter, reported on May 14, topped the Zacks Consensus Estimate. Valspar witnessed a recovery in its paint business in the quarter, driven by a rebound in the domestic housing market. The company backed its earnings forecast for fiscal 2013 and sees improved results in the second half.
Valspar has a strong pipeline of new products and significant opportunities for share gains in both its Paints and Coatings segments. The company is managing its cost well and maintaining a cost structure that is appropriate for the current external environment. Valspar should also benefit from its restructuring actions in fiscal 2013.
Winning new businesses also remains a company-wide focus that will position Valspar well for the future and help it offset lower demand in core markets. Its fastest growing markets are the emerging economies. The company expects to gain from new businesses in consumer paints, packaging, coil and wood coatings in second-half fiscal 2013.
Valspar also remains committed to boost shareholder returns leveraging healthy cash flows. In addition, it is making good progress with the integration of the acquired assets from Ace Hardware Corporation.
That said, we account for irregular demand trends across Valspar’s end markets and weakness for some of its products in overseas markets. We also remain cautious about cost pressures associated with raw material inflation. As such, the stock currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Other companies in the specialty chemicals industry with favorable Zacks Rank are American Vanguard (AVD), OM Group Inc. (OMG) and Ferro Corp. (FOE). While both American Vanguard and OM Group hold a Zacks Rank #1 (Strong Buy), Ferro retains a Zacks Rank #2 (Buy).
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