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Valspar’s Paint Segment Performed Marginally Better in 3Q16

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Valspar’s Paints segment

In 3Q16, Valspar’s (VAL) Paints segment reported revenue of $445.4 million, representing 39% of Valspar’s total revenue. This segment reported revenue of $443.8 million in 3Q15. The 3Q16 segment revenue reported a marginal increase of 0.4% year-over-year. The increase in the segment’s sales is mainly due to the acquisition of Quest, which added 4% to the segment’s net sale. Sales volume impacted sales positively by 1%.

On the other side, foreign currency translations impacted the segment negatively by 1.5%. Further, the price mix impacted the segment’s sale negatively by 3%. In the past seven quarters, the segment’s revenue has grown at a compound growth rate of 3.5%.

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Paints segment: Adjusted EBIT and margins

Valspar’s Paints segment reported adjusted EBIT (earnings before interests and taxes) of $67.5 million in 3Q16 compared to $51.7 million in 3Q15. This difference implies an increase in adjusted EBIT of 30.5% year-over-year. Valspar’s adjusted EBIT margins for 3Q16 stood at 15.2% compared to 11.7% in 3Q15. This difference implies an increase of 350 basis points in adjusted EBIT margins year-over-year. The increase in adjusted EBIT and margins was mainly driven by the benefits from Valspar’s productivity initiative and lower marketing expenses.

As of September 5, the SPDR S&P Dividend ETF (SDY) invested 0.50% of its total holdings in Valspar. The top three holdings of the ETF include People’s United Financial (PBCT), Caterpillar (CAT), and AT&T (T) with weights of 2.0%, 1.75%, and 1.7%, respectively. In the next part of this series, we’ll look into Valspar’s valuations.

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