Shares of The Valspar Corporation (NYSE:VAL) scaled a new 52-week high of $108.35 last Friday before retracing to end the day at $108.20.
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The Minneapolis, MN-based paint maker, with a market cap of roughly $8.58 billion, has delivered a year-to-date return of about 31.24%, higher than the S&P 500’s corresponding return of around 3.71%. Average volume of shares traded over the last three months is roughly 1,116K.
Valspar reported 10% higher year-on-year adjusted earnings per share (EPS) of $1.22 for second-quarter fiscal 2016 (ended Apr 29, 2016). Net sales for the quarter decreased 2% to $1.06 billion mainly due to a 3% foreign exchange headwind.
Valspar is focused on expanding its business through acquisitions that will position the company well for the future and help offset lower demand in core markets. New businesses contributed 5% to net sales and 3% to sales volume in the last reported quarter. The Quest acquisition boosted sales as well as adjusted EBIT in the company’s Paint segment. Valspar also bought Canada-based coatings maker, Madison Chemical Industries, which will allow it to broaden its coatings portfolio in the water infrastructure and wastewater management markets. The recent acquisition of ISVA Vernici further expanded the company’s sales and manufacturing capabilities in the European coil market.
Valspar is expected to perform well in the long term. The company gains from its diversified product portfolio. It expanded its non-BPA product portfolio by double digits in the previous fiscal year. Moreover, a recovering U.S. housing market and a large housing market in China, the targeted end markets for the company’s products, are expected to be highly beneficial. Valspar is also set on expanding its collaboration with Lowe’s (NYSE:LOW) by reaching more of its retail locations and introducing new lines of paint in 2016.
Additionally, Valspar entered into a definitive merger agreement with Sherwin-Williams (NYSE:SHW) in Mar 2016. Per the deal, Sherwin-Williams will buy Valspar for roughly $11.3 billion or $113 cash per share. If the proposed merger is approved by Valspar’s shareholders and regulatory bodies, the deal will likely conclude by the first quarter of calendar year 2017.
Valspar is a Zacks Rank #4 (Sell) stock.
Stock to Consider
A better-ranked company in the same space is Axiall Corporation (NYSE:AXLL) , sporting a Zacks Rank #1 (Strong Buy).
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LOWES COS (LOW): Free Stock Analysis Report
VALSPAR CORP (VAL): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis Report
AXIALL CORP (AXLL): Free Stock Analysis Report
Original post
Zacks Investment Research