- PPG Industries (NYSE:PPG) rose 0.9% today, and Valspar (VAL) dropped 1.4%, as J.P. Morgan says it now prefers PPG in the chemical coatings space.
- Morgan's Jeffrey Zekauskas downgraded Valspar to Neutral, from Overweight, but raised its price target to $85, from $83. After a two-month run where Valspar rose 15.6%, shares closed today at $84.21.
- With its price gain, Valspar's free cash flow yield is 5.1% -- fair value, according to Zekauskas, since it's not high compared to the average in their coverage universe.
- Valspar's revenues should be flat or lower in fiscal 2016 as forex challenges offset acquisition-based sales growth, he writes: “We think the coatings company now offering the most favorable risk/reward balance for investment in the year ahead is PPG. ... We expect PPG to benefit from a favorable raw material dynamic and good domestic volume growth versus weak 1H:15 domestic volume comparisons.”
- Valspar was also downgraded at RBC Capital (though like J.P. Morgan, the firm raised its price target, to $82).
- Valspar shares fell 0.4% after hours.