Net earnings for Valspar Corporation (NYSE:VAL), one of the largest paints and coatings manufacturers globally, improved a robust 69% to 61 cents per share in the second quarter of fiscal 2010 compared with net earnings of 36 cents in the year-ago period.

Quarterly revenues increased 20.2% year over year to $803.57 million. Sales increased significantly in all regions in both of Valspar’s Paints and Coatings segments. Earnings were largely helped by improving sales volume and a tight cost control. Operating expenses as a percentage of sales improved to 21% from 24.5% in the corresponding period of the previous year.

Sales in the Coatings segment improved 24% to $442.1 million driven by higher volume. Operating income in the segment more than doubled to $62.4 million. In the Paints segment, sales improved 18% to $304 million on higher volumes. Operating income of $52.2 million from the segment improved 47% year over year.

As of April 30, 2010, cash and cash equivalents of $164.63 million were up 12.3% from $187.72 million as of October 30, 2009. Total debt amounted to $873.50 million on April 30, 2010.

Outlook

Valspar has increased its earnings guidance to reflect the benefit of recovery in demand, partially offset by the challenging raw material environment. The company now expects to deliver adjusted net income per share in the range of $2.10 to $2.25 in fiscal 2010.

Analyst Revision Trend

Valspar’s earnings of 61 cents in the second quarter were ahead of the Zacks Consensus Estimate of 43 cents. Valspar expects earnings in the range of $2.10 to $2.25 per share in the second quarter of 2010 while the Zacks Consensus Estimate is pegged at 70 cents and $2.10 per share for the third quarter of fiscal 2010 and full year 2010, with a downside potential of 37.14% and 2.38%, respectively.

Over the last month, 2 out of the 13 analysts covering the stock have revised their estimates upward. With respect to earnings surprises, Valspar has not missed the Zacks Consensus Estimate in any of the last trailing four quarters, reflected by the average surprise of 28.01%. We remain Neutral on the stock.

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