Shares of Valspar have fallen by roughly 10 percent since mid August, underperforming the S&P 500, which lost only 5 percent in such a tough month. Now, lower consensus estimates, a reduced valuation and an increased cash flow yield make it an attractive investment option.
Positive Business Developments
According to a recent JPMorgan research note, the loss of the domestic paint business to Sherwin-Williams Co SHW seems to be smaller than expected. According to management, it is close to $150 million for 2015.
- Propylene prices have plummeted over the summer; even further, “propylene derivative prices (for acrylic chemicals) tend to reset quarterly, and there is probably another leg down for raw materials in 2016.”
- Titanium dioxide prices are likely to have fallen about 5 percent over the summer, as well.
- Raw material prices should continue to fall throughout 2016.
However, the report noted, “The benefit from falling raw material prices has been very much muted by negative currency translation effects.” Nonetheless, Valspar expects gross margins to expand, despite the negative translation effects and the “lack of volume growth due to business losses at Lowe’s.”
Image Credit: Public Domain© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
|---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
