The Valspar Corporation (VAL) saw its profits jump in fourth-quarter fiscal 2014 (ended Oct 31, 2014) on continued momentum across its coatings businesses, backed by higher volumes and strong performance across all its product lines. Its profits, as reported, surged around 70% year over year to roughly $108.1 million or $1.28 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 restructuring charges) of $1.38 per share for the quarter, compared to 97 cents per share in the same quarter a year ago. It topped the Zacks Consensus Estimate of $1.15.
For fiscal 2014, adjusted earnings were $4.35 per share, coming ahead of the Zacks Consensus Estimate of $4.12.
Revenues rose roughly 11.3% year over year to $1,233 million in the fourth quarter on gains across the company’s Paints and Coatings divisions and strong performance across international regions. Revenues also came ahead of the Zacks Consensus Estimate of $1,191 million.
For fiscal 2014, revenues increased 10.2% year over year to $4,522.4 million, beating the Zacks Consensus Estimate of $4,478 million. Valspar reported record sales and earnings in fiscal 2014.
Segment Highlights
Sales from Valspar’s Coatings division rose 15% year over year to $694 million in the quarter on the back of contributions from packaging, general Industrial and coil. Sales, excluding the acquisitions, rose 11% with volumes moving up in high single-digits.
The Paints segment's revenues moved up 7% to $479 million on volume gains across all regions. Sales rose in the high single-digits.
Margins and Expenses
Gross margin (as reported) improved to 34.3% in the reported quarter from 32.1% a year ago. Operating expenses went up 1.1% year over year to $259.8 million.
Dividends and Share Buybacks
Valspar’s board has cleared a 15% hike in its quarterly dividend to 30 cents per share, payable on Dec 19, 2014, to shareholders of record as of Dec 8, 2014. It had already paid a quarterly dividend of 26 cents per share in the fourth quarter.
Valspar’s board also approved a new share repurchase program, authorizing the company to buyback up to $1.5 billion of its outstanding shares. This program has no expiry date and replaces the previous repurchase program of Dec 2012.
Financials
Valspar ended the quarter with cash and cash equivalents of $128.2 million, down around 41% year over year. Total long-term debt declined 8.4% year over year to $950 million.
Guidance
Valspar expects sales growth for fiscal 2015 to be in the low single-digits. The company’s adjusted earnings guidance for fiscal 2015 is in the range of $4.45 to $4.65 per share. According to Valspar, the negative impact of currency translation, higher interest expenses and absence of the 53rd week in fiscal 2015 altogether can lower sales, roughly by 4 basis points and reduce adjusted earnings by around 24 cents in fiscal 2015.
Valspar has a Zacks Rank #3 (Hold).
A better-ranked company in the same sector worth considering is The Sherwin-Williams Company (SHW), with a Zacks Rank #2 (Buy).
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