Paint giant Valspar Corp. beat expectations with strong quarterly results Tuesday, as it benefited from the recovery of the U.S. residential paint market and some key acquisitions and partnerships over the past year.
Valspar CEO Gary Hendrickson told analysts during a conference call that the "fourth quarter was a good finish to the year as growth in both sales and operating income improved. Our sales growth was led by strong [results] in our U.S. consumer, wood and coil product lines and by the [August] acquisition of" the Inver Group, an Italian industrial coatings firm.
Inver generates about $200 million in sales a year, and officials expect the business to help drive growth in 2014 and to add substantially to its European industrial sales.
Over the past three months, Minneapolis-based Valspar continued rolling out its paint products throughout 550 Ace Hardware stores. The company expects to adopt agreements with up to 3,000 Ace franchises over the next year, officials said. Valspar bought Ace Hardware's paint manufacturing plants in January.
Valspar also made progress with its 2012 partnership with the B&Q hardware chain in Britain. Hendrickson said Valspar expects to have its paint and coatings brands inside all 350 B&Q stores by June.
Including Ace, Inver, B&Q and sales of Valspar's paints in Lowe's stores, net sales jumped 8 percent to $1.1 billion during the quarter. U.S. paint sales alone jumped 12 percent, CFO Jim Muehlbauer told analysts.
Fourth-quarter adjusted earnings rose 7.5 percent to $86 million, or 97 cents a share excluding items. The consensus forecast by Wall Street analysts was 91 cents a share. For the full fiscal year that ended Oct. 25, sales rose 2 percent to $4.1 billion. Adjusted earnings rose 3 percent to $320 million, or $3.54 a share.
Valspar shares closed Tuesday at $70.93, up 26 cents a share.
Results were partly offset by weak industrial coatings in China and a recovering housing market in Australia.
Hendrickson said sales are expected to rise 7 to 9 percent in fiscal 2014, while adjusted earnings from nonrecurring items are expected to reach $3.95 to $4.15 a share. He added that the company expects to see growth in its beverage-container coatings business.
Efficiency, productivity and cost-cutting measures will continue into next year, he said. Valspar recently decided to lay off up to 25 administrative and sales workers in the Minneapolis area. The company expects to add some research workers next year, when it opens its new R&D labs.