New products and the ability to grab market share from competitors helped Valspar Corp. offset the impact of higher raw material prices and report higher third-quarter sales and earnings, although the results fell slightly short of analysts' estimates.
The Minneapolis-based maker of paints and coatings Monday posted a 10 percent gain in revenue to $873.9 million for the period ended July 30. Earnings were $75.1 million vs. $65 million for the same quarter a year earlier.
Earnings-per-share excluding gains and charges relating to asset sales and restructuring were 70 cents vs. 67 cents a year ago. Analysts had estimated 71 cents a share in earnings on sales of $882.5 million.
Valspar shares closed Monday at $29.90, down nearly 2 percent for the day.
In a conference call with analysts, CEO William Mansfield said the company has begun to increase prices to soften the impact of higher raw material costs, which shrank Valspar's gross margin from 37 percent a year ago to 34 percent. Mansfield said raw material prices appear to be leveling off and should have less impact in the fourth quarter. The company boosted the bottom range of its earnings forecast for the year from $2.10 a share to $2.15 a share and kept the top range at $2.25 share.
Its coatings business, which accounts for more than half total sales, posted the strongest revenue increase, mostly because of robust sales of wood finishes and coatings for metal containers and coils. Mansfield said winning new business from competitors helped spark the improved results.
Healthy sales of paints in Asia offset slower paint sales in the United States, which continue to suffer from the depressed housing market. One bright spot, though, has been the recent successful launch of a new "high-definition" paint sold by Lowe's, a longtime retail partner. The new premium-priced paint boasts a superior formula designed to cover old colors in one coat.
"It's been a home run," Mansfield said.
