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Why Did Valspar Miss 3Q16 Analyst Revenue Estimates?

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Valspar 3Q16 revenues

Valspar’s (VAL) 3Q16 earnings beat analysts’ estimates but missed analysts’ revenue estimates. Wall Street analysts estimated Valspar’s revenue at $1.18 billion, but Valspar reported total revenue of $1.14 billion. Valspar’s 3Q16 revenue was 0.9% lower than its 3Q15 revenue of $1.15 billion. Valspar’s peers Sherwin-Williams (SHW), RPM International (RPM), and PPG Industries have yet to announce their 3Q16 earnings. Valspar follows November to October as its financial reporting year.

The marginal decline in total sales is due to the following factors:

  • Foreign exchange impacted total sales negatively by 2%.
  • Sales from acquisitions increased revenue 2%.
  • Adverse prices impacted the sales negatively by 2%. However, this impact was partially offset by an increase in volume. In 3Q16, overall sales volume rose 1%.
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Net profit margins

Valspar reported a net profit margin of 11.1% in 3Q16 compared to net profit margins of 9.5% in 3Q15. These margins imply an increase in net profit margin of 1.60 percentage points. The net profit margin increased mainly due to the lower cost of sales. In 3Q16, Valspar reported the cost of sales at $718 million compared to $733.6 million in 3Q15. The cost of sales as a percentage of sales also fell from 63.8% to 62.9%.

As of September 8, the iShares S&P mid-cap 40o value ETF (IJJ) invested 0.4% of its total holdings in Valspar. In the next part of this series, we’ll look into Valspar’s segment earnings details.

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