On Tuesday, Valspar will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
Valspar is a major paint producer, and with the big rebound in housing prices, the company's stock has risen toward all-time record highs. But can demand truly deliver on the promise the soaring share price reflects? Let's take an early look at what's been happening with Valspar over the past quarter and what we're likely to see in its quarterly report.
Stats on Valspar
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Can Valspar's earnings rebound this quarter?
In recent months, analysts have gotten less optimistic about Valspar's earnings prospects, cutting more than a dime per share from their earnings-per-share consensus on the just-ended quarter as well as the full 2013 fiscal year. But the share price hasn't gotten hurt a bit, having rebounded to recover all of its losses following its previous quarterly report and an extra gain of about 1% since early February.
Players throughout the paint industry have seen their prospects rise in light of the housing recovery. In its most recent report, Sherwin-Williams posted record profits and sales for its first quarter, as net income rose 17%. Sherwin projected that revenue growth would likely accelerate during the rest of the year. Fellow competitor PPG Industries also managed to top earnings estimates in its quarterly report last month, although its sales didn't produce the increase that analysts had expected to see.
Yet Valspar hasn't taken improvement in the housing industry for granted. Early last month, the company announced an expanded paint program with home-improvement retailerLowe's targeted at professional painters, seeking to compete both on price and service in providing custom tinting, color matching, and other useful services. That adds on to the new strategic relationship it implemented in January with Ace Hardware, in which Valspar bought Ace's paint-manufacturing assets and agreed to supply Ace-branded paint as well as its own brands for the hardware chain.
The big challenge for Valspar lies in its overseas markets. In last quarter's report, Valspar said that it continued to see weakness in demand from its international business, citing it as one of the main reasons for its cutting a nickel off its earnings guidance for the year. Still, the company expects to introduce paint to more than 300 locations in the U.K. and Ireland this year and generally sees international markets as promising.
In Valspar's quarterly report, be sure to compare the company's results against Sherwin-Williams and PPG as well as Valspar's own previous quarter. After having disappointed investors last quarter, Valspar needs to demonstrate its ability to move forward and take advantage of improving conditions in the industry.
The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of.Â Click here nowÂ to keep reading.
Click here to add Valspar to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
The article Valspar Faces a Huge Test This Week originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Lowe's and Sherwin-Williams. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.