Effective August 1, 2011, The Valspar Corporation (VAL) will increase prices for its Coil and Extrusion product lines by 8% depending on the product type. The price increase was attributable to the rising raw material costs.
Last month, Valspar reported its second-quarter 2011 financial results. Net earnings moved up 3 cents to 64 cents in the second quarter of 2011 from last year’s 61 cents and were in line with the Zacks Consensus Estimate. Adjusted net earnings excluded charges relating to acquisition of 5 cents per share and restructuring actions of 1 cent per share. Including these charges, earnings per share came in at 58 cents in the second quarter of 2011.
Quarterly sales jumped approximately 23.5% year over year to $992.7 million driven by new business efforts, pricing and acquisitions, offsetting rising raw material costs and surpassing the Zacks Consensus Estimate of $953 million.
Sales in Valspar’s Coatings segment increased 15.2% year over year to $509.1 million and sales in the Paints segment shot up to $418.4 million, up 37.6% from the prior-year quarter. Sales from intersegment business upped 13.4% year over year to $65.2 million.
Valspar continues to expect adjusted net income per share to be in the range of $2.45 to $2.65 per share in fiscal 2011. The company continues to raise its selling prices and take steps to further reduce its cost structure while maintaining investments in its brands and technology.
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 on 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.
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