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RPM International (RPM) Q3 Earnings & Sales Top Estimates

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RPM International Inc. (RPM - Free Report) reported better-than-expected results for third-quarter fiscal 2021 (ended Feb 28, 2021). Its top and bottom line not only surpassed the Zacks Consensus Estimate but also improved from the year-ago period. The uptrend was mainly driven by a strategically-balanced business model and MAP to Growth restructuring program.

However, following the results, shares of the company fell 4.4% during the trading hours on Apr 7. Notably, negative investor sentiments were witnessed as the company expects rise in costs and inflationary pricing pressure for the fourth quarter of fiscal 2021 and more significantly during fiscal 2022.

Inside the Headlines

RPM International reported adjusted earnings of 38 cents per share, which beat the consensus mark of 34 cents by 11.8% and increased an impressive 65.2% from the year-ago 23 cents.

Net sales of $1,269.4 million surpassed the consensus mark of $1,204 million by 5.4% and rose 8.1% from the prior-year level of $1,174.0 million. The upside was led by 4.9% organic sales growth. Acquisitions contributed 2.1% to net sales growth. Strong contributions from Consumer Group and Specialty Products segments were partially offset by softness in the Performance Coatings Group.

Adjusted EBIT in the reported quarter increased 32.2% year over year to $79.9 million.

RPM International Inc. Price, Consensus and EPS Surprise

 

RPM International Inc. Price, Consensus and EPS Surprise

RPM International Inc. price-consensus-eps-surprise-chart | RPM International Inc. Quote

Segmental Details

Construction Products Group (CPG): During the fiscal third quarter, sales in the segment increased 6.4% from a year ago to $396 million owing to 5.4% organic growth and a 1% impact of favorable foreign currency. Growth in Construction Products Group was largely attributable to the focus on renovation and restoration projects by expanding CPG’s position as a single-source provider of building envelope systems. The segment continued to gain market share during the quarter in unique construction technologies led by its insulated concrete form business, which is seeing increased adoption as a construction method versus traditional stick-built construction Adjusted EBIT was $18.5 million, up 206.4% year over year.

Performance Coatings Group (PCG): Segment sales decreased 11.4% from a year ago to $226.5 million owing to a 12.7% decline in organic sales. Nonetheless, favorable foreign currency translation of 1.3% contributed to sales. The PCG segment experienced an organic sales decline during the quarter due to the continued deferral of flooring and coating projects as a result of restrictions associated with COVID-19, which impacted the ability of contractors to gain access to the facilities of end customers.

Also, customers in the energy sector are facing poor economic conditions, which are causing deferrals in industrial maintenance spending. Nonetheless, MAP to Growth savings and cost-reduction plans partly offset the negatives. Adjusted EBIT decreased 41.6% on a year-over-year basis to $14.1 million.

Consumer Group: Sales of $477.7 million in the segment improved 19.8% from the prior-year period backed by 12.7% organic growth. Acquisitions contributed 6.1% to sales and foreign currency translation positively impacted sales by 1%. The upside was led by higher demand owing to broad distribution and market-leading position as consumers are more homebound because of the pandemic. Additionally, brisk cleaning product sales drove the top line. The segment’s adjusted EBIT totaled $47.8 million, up a notable 48.6% from the prior-year level of $32.1 million. The bottom line benefited from increasing sales volume and MAP to Growth initiatives.

Specialty Products Group: The segment’s sales totaled $169.2 million, which increased 14.7% on a year-over-year basis owing to a 13.4% rise in organic sales. This along with a contribution of 1.3% from favorable foreign currency translation added to the positives. The improvement was primarily backed by growth in restoration equipment business, resulting from extreme weather events in North America.

Moreover, strong demand for disinfectants, furniture and outdoor recreational equipment added to the positives. Adjusted EBIT during the quarter totaled $25.3 million, up 44.2 % year over year.

Balance Sheet

As of Feb 28, 2021, RPM International had cash and cash equivalents of $249.2 million compared with $212.2 million a year ago and $233.4 million at fiscal 2020-end. Long-term debt (excluding current maturities) at the quarter-end was $2.31 billion compared with $2.49 billion in the prior-year period and $2.46 billion at fiscal 2020-end. Cash provided by operations was $651.9 million for the first nine months of fiscal 2021 compared with $381.2 million in the year-ago period.

Q4 Outlook

Several factors like disruption caused by the winter storm Uri, intermittent supplier plant shutdowns owing to the pandemic and significant worldwide demand for packaging may cause inflationary and supply pressure on some of the product categories. This is likely to increase the overall cost for the fourth quarter of fiscal 2021 and more significantly during fiscal 2022. For the fiscal fourth quarter, RPM International anticipates net sales and adjusted EBIT growth in double digits. Excluding the non-operating segment, adjusted EBIT for four operating segments in total is expected to increase more than 20%.

Meanwhile, the company ensures to continue its cost-saving initiatives and operational improvements in the fiscal fourth quarter. It expects to exceed the targeted MAP to Growth program’s planned run rate of $290 million in annualized savings.

Zacks Rank

RPM — which shares space with Acuity Brands, Inc. (AYI - Free Report) , TopBuild Corp. (BLD - Free Report) and Armstrong World Industries, Inc. (AWI - Free Report) in the Zacks Construction sector — currently carries a Zacks Rank #4 (Sell).

You can the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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