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Valspar Tops Q4 Earnings, Jacks Up Dividend

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Leading paint and coatings maker The Valspar Corporation topped earnings expectations in fourth-quarter fiscal 2013 (ended Oct 25, 2013), but hefty restructuring costs dented its bottom line in the quarter.

The Minneapolis-based company raked in earnings, barring restructuring and acquisition charges, of 97 cents per share for the quarter that beat the Zacks Consensus Estimate by 6 cents and exceeded the year-ago quarter earnings of 86 cents.

Profit, as reported, slipped 14% year over year to $63.5 million or 72 cents a share from $73.8 million or 79 cents a year ago, hurt by charges.

For fiscal 2013, profit (as reported) clipped 1% year over year to $289.3 million or $3.20 per share. Adjusted earnings were $3.54 per share versus $3.28 per share posted a year ago. It came ahead of the Zacks Consensus Estimate of $3.49.

Separately, Valspar announced a 13% hike in its quarterly dividend. Its shares gained 3% to $72.84 in regular trading yesterday, but pulled back to close the day at $70.93. The stock is up roughly 15% so far this year.


Revenues went up 8% year over year to $1,108 million in the reported quarter with gains witnessed across Paints and Coatings divisions. It beat the Zacks Consensus Estimate of $1,084 million. Sales were driven by strength in the U.S. consumer paint, coil and wood product lines, backed by the Inver acquisition.

Revenues from Valspar’s larger Coatings division rose 5% year over year to $602 million in the quarter as increases across coil, wood product lines and contributions of Inver acquisition more than offset softness in general industrial product lines.

Sales from the Paints segment moved up 13% to $449 million on strong gains in the U.S. and new business wins.

For the full year, sales edged up 2% year over year to roughly $4,104 million, also beating the Zacks Consensus Estimate of $4,076 million.

Margins and Expenses

Gross margin (as reported) fell to 32.1% in the reported quarter from 33.3% a year ago. Adjusted gross margin slipped to 33.4% from 34% in the prior-year quarter. Operating expenses rose 9% year over year to $243 million, mostly due to higher selling, general and administrative costs and restructuring charges. Operating expenses (as a percentage of sales) were 21.9%, up modestly from 21.7% a year ago.

Balance Sheet and Shareholder Returns

Valspar ended fiscal 2013 with cash and cash equivalents of $216.2 million, up 15% year over year. Total long-term debt declined roughly 2% year over year to $1,037.4 million.

Valspar’s Board approved a 13% rise in its quarterly dividend to 26 cents per share, marking the 36th straight year of dividend increase. The revised dividend is payable on Dec 13, 2013, to shareholders of record as of Dec 2, 2013.


Valspar, which is among the leading paints companies along with Akzo Nobel (AKZOY - Free Report) , PPG Industries (PPG - Free Report) and Sherwin-Williams (SHW - Free Report) , sees accelerated revenues and earnings gains in fiscal 2014 through new business wins, contributions of acquisitions, a stable domestic market and efforts to improve productivity.  

Adjusted earnings for fiscal 2014 have been forecast in the range of $3.95 to $4.15 per share. Revenues for the full year are expected to rise 7%-9% from fiscal 2013.

Valspar, a Zacks Rank #4 (Sell) stock, has a strong pipeline of new products and significant opportunities for share gains in both its Paint and Coatings segments globally. The company should also benefit from its restructuring actions while maintaining its operational and pricing discipline.

We are optimistic about Valspar’s long-term performance, which is likely to be driven by volume increases in both the paint and coatings categories. However, we are concerned about the irregular demand trends across some of its end markets and weakness in overseas markets.

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