Valspar VAL logged a profit (as reported) of $104 million or $1.27 per share for fourth-quarter fiscal 2016 (ended Oct 28, 2016), up 1% from $102 million or $1.26 per share recorded in the prior-year quarter. Adjusted earnings (barring non-recurring items including merger-related expenses of roughly $3 million) came in at $1.37 per share in the fiscal fourth quarter, missing the Zacks Consensus Estimate of $1.49. Revenues fell roughly 4% year over year to $1,106.1 million in the reported quarter. Foreign currency translation unfavorably impacted net sales by 1%. Sales also trailed the Zacks Consensus Estimate of $1,164.9 million. For fiscal 2016, the company recorded a profit of $353 million or $4.36 per share, down 12% year over year, hurt by restructuring and merger-related charges. Sales for the year fell 5% year over year to $4,190.6 million. Currency swings negatively impacted sales by 3% while acquisitions contributed 3%. Segment Highlights Sales from Valspar’s larger Coatings segment dropped 2% year over year to $626 million in the fiscal fourth quarter. Foreign currency translation hurt sales by 2% while acquisitions contributed 1%. Sales volumes rose 2% in the quarter. Revenues from the Paints segment slipped 7% year over year to $421 million in the reported quarter. Currency fluctuations unfavorably impacted sales by 1%. Volumes fell 7% in the quarter. Financials Valspar ended fiscal 2016 with cash and cash equivalents of around $174.7 million, down 6% year over year. Long-term debt decreased around 9% year over year to roughly $1,557 million. Valspar paid dividends worth $105 million during fiscal 2016. The company also bought back around 200,000 shares for $18 million during the year. Proposed Merger Valspar and Sherwin-Williams SHW entered into a definitive merger agreement in Mar 2016. Per the deal, Sherwin-Williams will purchase Valspar for roughly $11.3 billion or $113 cash per share. The proposed merger has been approved by Valspar’s shareholders in Jun 2016 in a Special Meeting for shareholders and is likely to conclude by the first quarter of calendar year 2017, subject to customary closing conditions. Price Performance Valspar has underperformed the Zacks categorized Paints & Allied Products industry over the past three months. The company’s shares have declined around 3.1% over this period, compared with roughly 2.6% decline recorded by the industry.
While Valspar should gain from new business wins, portfolio expansion and cost management initiatives, it remains exposed to currency headwinds and volatility in raw material costs. Moreover, the overall demand environment remains uneven.
Zacks Rank & Key Picks Valspar currently has a Zacks Rank #3 (Hold). Better-ranked companies in the basic materials space include The Chemours Company CC and Celanese Corporation ( CE Quick Quote CE - Free Report) . Chemours sports a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth of around 60.1% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here. Celanese carries a Zacks Rank #2 (Buy) and has an expected earnings growth of around 9.7% for the current year. Zacks’ Best Private Investment Ideas In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time? Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>