Valspar Corp.'s expanding partnerships with Lowe's and Ace Hardware helped the coatings maker beat Wall Street's expectations Wednesday as first quarter sales rose 9 percent and adjusted earnings jumped 11 percent. Valspar shares closed at a 52-week high of $75.03, up 6.3 percent, or $4.44, for the day.
The Minneapolis-based paint manufacturer said it benefited from a new professional paint line it introduced into Lowe's retail stores nearly a year ago. Sales also improved as Valspar continued its rollout of branded paint and coatings across the Ace Hardware store chain. Valspar makes branded products for 1,500 Ace stores, a number that will rise to 3,000 by this summer.
For the three months ended Jan. 24, Valspar's sales rose 9 percent to $956 million while adjusted earnings jumped 11 percent to $61 million, or 70 cents a share. Analysts had expected adjusted earnings of 66 cents a share.
It is "a nice start to the year," said Longbow Research analyst Dmitry Silversteyn.
Ace and Lowe's "were the big drivers" during the quarter, CEO Gary Hendrickson told analysts. "All of our paint businesses were firing on all cylinders."
Paint sales were helped by strong housing markets in North America and Australia, he said. Additionally, the company's coatings business performed well with furniture and industrial plants in China and big industrial customers such as John Deere and Caterpillar.
Coatings sales grew despite a few pipe and industrial customers who put off orders due to unusually cold or bad weather.
"It was a great quarter," said Ivan Marcuse, equity research analyst with KeyBanc Capital Markets.
In addition to Ace and Lowe's, Valspar is building upon its 2012 partnership with the B&Q hardware chain in Britain. Valspar now has products in about 100 B&Q stores. It is on track to be in 350 by the fall, Hendrickson said.
Valspar is also making progress after its August 2013 purchase of the Inver Group in Italy, which makes industrial liquid and powder coatings for customers across Europe. Inver generates about $200 million in annual sales, and contributed about 25 percent of that to first quarter results, said CFO James Muehlbauer. The Inver "integration process goes pretty well. The business is performing in line [or] slightly better [than expected] and we are encouraged by the top line."
Going forward into 2014, Hendrickson and Muehlbauer did not change their forecast for 7 to 9 percent sales growth. But they emphasized that they remain "cautious" since some industrial customers warned that their sales could be flat.