The Valspar Corporation (VAL) saw its profits jump in first-quarter fiscal 2015 (ended Jan 30, 2015) on continued momentum across its coatings businesses, strong performance in China, new business wins in many of its product lines and gains from productivity initiatives. Its profits, as reported, surged around 94% year over year to roughly $104 million or $1.24 a share.
Valspar, which is one of the prominent paint makers along with Akzo Nobel NV (AKZOY) and PPG Industries Inc. (PPG), reported adjusted earnings (barring one-time items including restructuring charges) of 85 cents per share for the quarter compared with 70 cents per share earned in the year-ago quarter. Earnings topped the Zacks Consensus Estimate of 76 cents.
Revenues rose roughly 4% year over year to $992 million in the first quarter on gains in the company’s Coatings division and also came ahead of the Zacks Consensus Estimate of $969 million.
Segment Highlights
Sales from Valspar’s Coatings division rose 7% year over year to $586.4 million in the quarter. Net sales in local currency and volumes both were up 10%.
The Paints segment's revenues moved down 1% to $359 million, while net sales in local currency increased 2%.
Margins and Expenses
Gross margin (as reported) improved to 33.6% in the reported quarter from 33.3% a year ago. Operating expenses went up 0.2% year over year to $223.9 million.
Sale of Non-Strategic Assets
Valspar completed the sale of certain assets related to a non-strategic product in its Coatings segment during the reported quarter. The company recorded the asset sale in the first quarter, which included a pre-tax gain of roughly $48 million to reported income from operations.
Financials
Valspar ended the quarter with cash and cash equivalents of $191.8 million, down around 0.4% year over year. Total long-term debt rose 33.4% year over year to $1,350 million.
Guidance
Valspar reiterated its fiscal 2015 earnings per share (as adjusted) guidance of $4.45 to $4.65. Due to the impact of a stronger U.S. Dollar, Valspar updated its fiscal 2015 sales guidance and now sees roughly flat sales on a year over year basis versus the previous guidance of low single-digit growth.
Valspar has a Zacks Rank #4 (Sell).
A better-ranked stock in the same sector is The Sherwin-Williams Company (SHW), with a Zacks Rank #2 (Buy).
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