Back to top

Image: Bigstock

Supply-Chain Woes to Ail RPM International (RPM) Q2 Earnings

Read MoreHide Full Article

RPM International Inc. (RPM - Free Report) is scheduled to report second-quarter fiscal 2022 results (ended Nov 30) on Jan 5, before the opening bell.

In the last reported quarter, the company’s earnings and sales topped the Zacks Consensus Estimate by 8% and 0.02%, respectively. On a year-over-year basis, earnings decreased 25% but net sales increased 2.7%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been unchanged at 86 cents per share over the past 60 days. The estimated value indicates an 18.9% decrease from the year-ago earnings of $1.06 per share. The consensus mark for revenues is $1.58 billion, suggesting a 6.2% year-over-year improvement.

RPM International Inc. Price and EPS Surprise

RPM International Inc. Price and EPS Surprise

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

Factors to Consider

For the quarter to be reported, RPM International — which focuses on building restoration, renovation and innovation — anticipates sales to increase in mid-single digits from second-quarter fiscal 2021. It anticipates Construction Products Group, Performance Coatings Group and Specialty Products Group to witness sales growth in double digits. Yet, the company expects Consumer Group to witness a double-digit sales decline, given raw material shortages. Nevertheless, the Consumer Group’s second-quarter fiscal 2022 sales are anticipated to grow beyond the pre-pandemic level.

Resilient housing and home improvement markets are expected to have aided revenues in the fiscal second quarter. Accretive buyouts and excellent momentum in the MAP to Growth program also added to the positives.

Yet, the company has been facing the wrath of unprecedented supply-chain disruptions and raw materials, packaging-related inflation. It has also been witnessing additional overhead expenses resulting from the ongoing investments in capacity. This is anticipated to have put pressure on the bottom line.

Importantly, rapidly escalating material costs and insufficient supply of raw materials have been compressing margins. Raw material inflation is expected to have impacted its bottom-line performance. Also, costs of all types of transportation such as rail, over-the-road, truck and ocean freight may have been headwinds.

The company expects adjusted EBIT for second-quarter fiscal 2022 to decline 15-25% from the year-ago period.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for RPM International this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Its earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

According to our model, here are some companies that have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Acuity Brands, Inc. (AYI - Free Report) has an Earnings ESP of +3.52% and a Zacks Rank #2.

Earnings for the first quarter of fiscal 2022 are expected to increase 16.8% year over year. Earnings estimates have increased to $2.37 per share from $2.36 over the past 30 days.

Thor Industries, Inc. (THO - Free Report) has an Earnings ESP of +3.71% and a Zacks Rank #3.

Earnings for the second quarter of fiscal 2022 are expected to increase 42.4% year over year. Earnings estimates have increased to $3.39 per share from $2.91 over the past 30 days.

Williams-Sonoma, Inc. (WSM - Free Report) has an Earnings ESP of +8.26% and a Zacks Rank #1.

Earnings for the fourth quarter of fiscal 2021 are expected to increase 21.3% year over year. Earnings estimates have increased to $4.79 per share from $4.76 over the past 30 days.