Valspar Q3 Adj Profit Tops View, But Sales Miss; Boosts 2015 EPS Outlook

(RTTNews) - Paints and coatings maker Valspar Corp. (VAL) reported Tuesday a profit for the third quarter that increased from last year, despite a sales drop, reflecting improved margins. Adjusted earnings per share topped analysts' expectations, while quarterly sales missed their estimates. The company also raised adjusted earnings guidance for the full-year 2015.

"These results were driven by our strong commercial execution and significant productivity initiatives, despite the impact of unfavorable currency and the change in our North American Paint business," Chairman and CEO Gary Hendrickson said in a statement.

The Minneapolis, Minnesota-based company reported net income of $102.86 million or $1.25 per share for the third quarter, higher than $97.83 million or $1.14 per share in the prior-year quarter.

Excluding the charges, adjusted net income for the quarter was $108.78 million, or $1.33 per share, compared to $103.45 million and $1.21 per share in the year-ago quarter.

On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $1.26 per share for the quarter. Analysts' estimates typically excludes special items.

Net sales for the quarter declined 7 percent to $1.15 billion from $1.23 billion in the same quarter last year, and missed twelve Wall Street analysts' consensus estimate of $1.17 billion. Net sales decreased 1 percent in local currency and volumes were flat.

The effects of foreign currency translation negatively impacted net sales by 5 percent, while acquisitions added 2 percent to net sales in the quarter.

Coatings net sales for the quarter decreased 6.5 percent to $640 million from the year-ago quarter. Net sales were flat in local currency and volumes were up 1 percent.

Net sales for paints declined 7.5 percent to $444 million from the prior-year quarter. Segment net sales decreased 3 percent in local currency, and volumes were down 4 percent as volume growth in international regions was more than offset by a decline in North America.

The company noted that acquisition of Quest Specialty Chemicals added 3 percent to paints segment volume and 6 percent to segment net sales.

"Against the backdrop of strong performance in the prior year, Coatings segment volumes grew driven by new business wins in the General Industrial and Coil product lines. In the Paints segment, volumes were up in each of the international regions. North America Paints volumes also increased, excluding the product line adjustment at a significant customer," Hendrickson added.

Operating profit margin for the quarter improved 170 basis points to 14.4 percent from last year as gross profit margin expanded 190 basis points, partially offset by a 40 basis points increase in operating expense as a percentage of total sales.

Looking ahead to 2015, the company raised adjusted earnings guidance to a range of $4.55 to $4.65 per share from the prior guidance in the range $4.45 to $4.65 per share. Annual sales in now projected to decline in the mid single-digits, compared to the previous expectation of a low single-digits sales decline.

Street is currently looking for full-year 2015 earnings of $4.58 per share on annual revenue drop of 0.7 percent to $4.49 billion.

In Tuesday's regular trading session, VAL is currently trading at $75.09, down $0.64 or 0.85% on a volume of 0.35 million shares.