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RPM International (RPM) Down 1.9% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for RPM International (RPM - Free Report) . Shares have lost about 1.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RPM International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
RPM International Inc. reported better-than-expected results for fourth-quarter fiscal 2021 (ended May 31, 2021). Its top and bottom line not only surpassed the Zacks Consensus Estimate but also improved from the year-ago period. The upside was mainly driven by strategic business operation and successful implementation of the MAP to Growth improvement program.
Inside the Headlines
RPM International reported adjusted earnings of $1.28 cents per share, which beat the consensus mark of $1.26 cents by 1.6% and increased an impressive 13.3% from the year-ago earnings of $1.13.
Net sales of $1,744.3 million surpassed the consensus mark of $1,686 million by 3.5% and rose 19.6% from the prior-year level of $1,459 million. The upside was led by 13.9% organic sales growth. Acquisitions and foreign currency translation contributed 2.2% and 3.5% to net sales growth, respectively. Strong contributions from all four operating segments, successful implementation of the MAP to Growth program helped offset raw material inflation and supply-chain disruptions.
Adjusted EBIT in the reported quarter increased 10.6% year over year to $236.2 million.
Segmental Details
Construction Products Group (“CPG”): During the fiscal fourth quarter, sales in the segment increased 33.2 % from a year ago to $629.4 million owing to 28.4% organic growth and a 4.8% impact of favorable foreign currency. Growth in CPG was largely attributable to solid North America and European businesses backed by accelerated construction, maintenance and repair activity. Also, demand for Nudura Insulated Concrete Forms remained high owing to the relatively-low installation cost along with their environmental and structural benefits. Adjusted EBIT was $110.4 million, up 42.7% year over year.
Performance Coatings Group (“PCG”): Segment sales increased 20.5% from a year ago to $283.3 million owing to a 12.9% rise in organic sales and 2.9% of acquisition-related contributions. Also, favorable foreign currency translation of 4.7% contributed to sales. The PCG segment reflects benefits from pent-up demand for the construction, maintenance and repair of structures in the United States and abroad.
Adjusted EBIT increased 31.2% on a year-over-year basis to $31 million. The strong performance was driven by higher sales volumes, MAP to Growth savings and cost-reduction plans, partly offsetting the raw material inflation.
Consumer Group: Sales in the segment improved 2% year over year to $628.9 million, primarily driven by acquisition-related contributions of 3.8% and 2% impact of favorable foreign currency. DIY home improvement activity began to slow toward the end of the fiscal fourth quarter as more Americans were vaccinated. Yet, demand in international markets was still strong owing to government mandates. The segment’s adjusted EBIT decreased 10.4% to $93.6 million, from the prior-year level of $104.5 million due to cost pressure.
Specialty Products Group: The segment’s sales totaled $202.8 million, which increased 49.9% on a year-over-year basis owing to a 46.2% rise in organic sales. This along with a contribution of 3% from favorable foreign currency translation and 0.7% related to acquisitions added to the positives. The improvement was primarily backed by growth in cleaning chemicals, restoration equipment and coatings for recreational watercraft, food, pharmaceuticals, wood and other OEM applications.
Adjusted EBIT during the quarter totaled $36.3 million, up a record 395% from the prior-year level of $7.3 million. Recent management changes, increased business development initiatives and improving market conditions helped the segment post highest organic growth among the four operating segments.
Balance Sheet
As of May 31, 2021, RPM International had cash and cash equivalents of $246.7 million compared with $233.4 million at fiscal 2020-end. Long-term debt (excluding current maturities) at the quarter-end was $2.38 billion compared with $2.46 billion at fiscal 2020-end. As of May 31, 2021, cash provided by operations amounted to $766.2 million, up from $549.9 million in the year-ago period.
Fiscal 2021 Highlights
Net sales for fiscal 2021 totaled $6.11 billion, up 10.9% from $5.51 billion in fiscal 2020. Diluted EPS in fiscal 2021 increased 35.5% to $4.16 from $3.07 a year ago. Adjusted EBIT for fiscal 2021 was reported at $784.6 million, up 26.5% from $620.3 million reported last year.
Outlook
Several external factors may cause inflationary and supply pressure on some of the product categories. The company continues to offset these increased costs with incremental MAP to Growth savings and selling price increases. For the first half of fiscal 2022, RPM International anticipates all segments (barring Consumer Group) to put up strong top and bottom-line performance.
For first-quarter fiscal 2022, the company expects sales to increase in the low- to mid-single digits versus first-quarter fiscal 2021. It anticipates CPG and PCG to witness sales growth in the high-single or low-double digits. Sales in the Specialty Products Group are expected to generate double-digit sales growth. However, the company expects Consumer Group to decline double digits. Nevertheless, the Consumer Group’s first-quarter sales fiscal 2022 is anticipated to grow beyond the pre-pandemic record.
Adjusted EBIT first-quarter fiscal 2022 is expected to grow for business segments, excepting for Consumer Group. Consolidated adjusted EBIT is expected to decrease 25-30% compared with the year-ago adjusted EBIT of nearly 40%.
Furthermore, for second-quarter fiscal 2022, the trend is likely to continue. The company is optimistic that the combined EBIT growth in the other three segments will offset the soft performance of the Consumer Group. The consolidated adjusted EBIT is expected to be nearly flat compared to the prior year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -24.49% due to these changes.
VGM Scores
Currently, RPM International has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise RPM International has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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RPM International (RPM) Down 1.9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for RPM International (RPM - Free Report) . Shares have lost about 1.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RPM International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
RPM International (RPM - Free Report) Q4 Earnings & Sales Trump Estimates
RPM International Inc. reported better-than-expected results for fourth-quarter fiscal 2021 (ended May 31, 2021). Its top and bottom line not only surpassed the Zacks Consensus Estimate but also improved from the year-ago period. The upside was mainly driven by strategic business operation and successful implementation of the MAP to Growth improvement program.
Inside the Headlines
RPM International reported adjusted earnings of $1.28 cents per share, which beat the consensus mark of $1.26 cents by 1.6% and increased an impressive 13.3% from the year-ago earnings of $1.13.
Net sales of $1,744.3 million surpassed the consensus mark of $1,686 million by 3.5% and rose 19.6% from the prior-year level of $1,459 million. The upside was led by 13.9% organic sales growth. Acquisitions and foreign currency translation contributed 2.2% and 3.5% to net sales growth, respectively. Strong contributions from all four operating segments, successful implementation of the MAP to Growth program helped offset raw material inflation and supply-chain disruptions.
Adjusted EBIT in the reported quarter increased 10.6% year over year to $236.2 million.
Segmental Details
Construction Products Group (“CPG”): During the fiscal fourth quarter, sales in the segment increased 33.2 % from a year ago to $629.4 million owing to 28.4% organic growth and a 4.8% impact of favorable foreign currency. Growth in CPG was largely attributable to solid North America and European businesses backed by accelerated construction, maintenance and repair activity. Also, demand for Nudura Insulated Concrete Forms remained high owing to the relatively-low installation cost along with their environmental and structural benefits. Adjusted EBIT was $110.4 million, up 42.7% year over year.
Performance Coatings Group (“PCG”): Segment sales increased 20.5% from a year ago to $283.3 million owing to a 12.9% rise in organic sales and 2.9% of acquisition-related contributions. Also, favorable foreign currency translation of 4.7% contributed to sales. The PCG segment reflects benefits from pent-up demand for the construction, maintenance and repair of structures in the United States and abroad.
Adjusted EBIT increased 31.2% on a year-over-year basis to $31 million. The strong performance was driven by higher sales volumes, MAP to Growth savings and cost-reduction plans, partly offsetting the raw material inflation.
Consumer Group: Sales in the segment improved 2% year over year to $628.9 million, primarily driven by acquisition-related contributions of 3.8% and 2% impact of favorable foreign currency. DIY home improvement activity began to slow toward the end of the fiscal fourth quarter as more Americans were vaccinated. Yet, demand in international markets was still strong owing to government mandates. The segment’s adjusted EBIT decreased 10.4% to $93.6 million, from the prior-year level of $104.5 million due to cost pressure.
Specialty Products Group: The segment’s sales totaled $202.8 million, which increased 49.9% on a year-over-year basis owing to a 46.2% rise in organic sales. This along with a contribution of 3% from favorable foreign currency translation and 0.7% related to acquisitions added to the positives. The improvement was primarily backed by growth in cleaning chemicals, restoration equipment and coatings for recreational watercraft, food, pharmaceuticals, wood and other OEM applications.
Adjusted EBIT during the quarter totaled $36.3 million, up a record 395% from the prior-year level of $7.3 million. Recent management changes, increased business development initiatives and improving market conditions helped the segment post highest organic growth among the four operating segments.
Balance Sheet
As of May 31, 2021, RPM International had cash and cash equivalents of $246.7 million compared with $233.4 million at fiscal 2020-end. Long-term debt (excluding current maturities) at the quarter-end was $2.38 billion compared with $2.46 billion at fiscal 2020-end. As of May 31, 2021, cash provided by operations amounted to $766.2 million, up from $549.9 million in the year-ago period.
Fiscal 2021 Highlights
Net sales for fiscal 2021 totaled $6.11 billion, up 10.9% from $5.51 billion in fiscal 2020. Diluted EPS in fiscal 2021 increased 35.5% to $4.16 from $3.07 a year ago. Adjusted EBIT for fiscal 2021 was reported at $784.6 million, up 26.5% from $620.3 million reported last year.
Outlook
Several external factors may cause inflationary and supply pressure on some of the product categories. The company continues to offset these increased costs with incremental MAP to Growth savings and selling price increases. For the first half of fiscal 2022, RPM International anticipates all segments (barring Consumer Group) to put up strong top and bottom-line performance.
For first-quarter fiscal 2022, the company expects sales to increase in the low- to mid-single digits versus first-quarter fiscal 2021. It anticipates CPG and PCG to witness sales growth in the high-single or low-double digits. Sales in the Specialty Products Group are expected to generate double-digit sales growth. However, the company expects Consumer Group to decline double digits. Nevertheless, the Consumer Group’s first-quarter sales fiscal 2022 is anticipated to grow beyond the pre-pandemic record.
Adjusted EBIT first-quarter fiscal 2022 is expected to grow for business segments, excepting for Consumer Group. Consolidated adjusted EBIT is expected to decrease 25-30% compared with the year-ago adjusted EBIT of nearly 40%.
Furthermore, for second-quarter fiscal 2022, the trend is likely to continue. The company is optimistic that the combined EBIT growth in the other three segments will offset the soft performance of the Consumer Group. The consolidated adjusted EBIT is expected to be nearly flat compared to the prior year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -24.49% due to these changes.
VGM Scores
Currently, RPM International has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise RPM International has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.