The Valspar Corporation (VAL) announced an increase in the price of its North America Wood Coatings Products effective July 1, 2011. The price increase is attributable to the increasing raw material prices and is a measure taken to offset this. The prices of the products will increase by up to 10% depending on the type of the product.
Last week the company increased prices for its Coil and Extrusion product lines by 8% depending on the product type.
The company has been reporting solid results and robust margin gains in the past few quarters due to its cost reduction efforts, increasing product prices and productivity gains.
Last month the company released its second quarter earnings. 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 were 58 cents in the second quarter of 2011.
Quarterly sales jumped about 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 increased 13.4% year over year to $65.2 million.
Gross margin decreased to 31.8% in the reported quarter versus 34.0% in the comparable year ago quarter. Operating expense as a percentage of net sales slightly increased to 21.8% from last year’s 21.0%.
Valspar expects 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 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 #3 Rank (Hold) on the stock.
PPG INDS INC (PPG): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis Report
Be the first to comment