A month has gone by since the last earnings report for RPM International (RPM Quick QuoteRPM - Free Report) . Shares have lost about 7% 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 its most recent earnings report in order to get a better handle on the important catalysts.

RPM International Q2 Earnings Miss, Revenues Beat

RPM International Inc. reported second-quarter fiscal 2022 (ended Nov 30, 2021) results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. The company continues to experience raw material shortages, supply chain disruptions and material, wage, and freight inflation.

Nevertheless, price increases and higher demand for paints, coatings, sealants, and other building materials have been a boon for RPM International.

Inside the Headlines

RPM International reported adjusted earnings of 79 cents per share, which missed the consensus mark of 86 cents by 8.1% and decreased 25.5% from the year-ago figure of $1.06.

Net sales of $1,639.5 million surpassed the consensus mark of $1,578 million by 3.9% and increased 10.3% from the prior-year level of $1,485.9 million. The upside was led by strong contributions from three operating segments.

Adjusted EBIT for the reported quarter decreased 21.3% year over year to $157.3 million.

Segmental Details

Construction Products Group (“CPG”): For the fiscal second quarter, sales in the segment increased 22% from a year ago to $614.2 million owing to 19.9% organic growth and a 0.3% impact of favorable foreign currency. Acquisitions also contributed 1.8% to its top line. Adjusted EBIT was $91.4 million, up 16.5% year over year.

Performance Coatings Group (“PCG”): Segment sales increased 16.9% from a year ago to $302.5 million, owing to a 12.2% rise in organic sales and 3.9% acquisition-related sales contribution. Also, a favorable foreign currency translation of 0.8% contributed to sales. Adjusted EBIT increased 41.3% on a year-over-year basis to $39.6 million.

Consumer Group: Sales in the segment declined 3.3% year over year to $529.2 million owing to a 3.5% decline in organic sales. Yet, favorable foreign currency translation contributed 0.2% to sales. The segment’s adjusted EBIT decreased 62.9% from the prior-year level to $33.6 million due to cost pressure.

Specialty Products Group (“SPG”): The segment’s sales totaled $193.6 million, which increased 10% on a year-over-year basis owing to a 9% rise in organic sales. Also, favorable foreign currency translation and acquisitions contributed 0.6% and 0.4%, respectively, to sales. Adjusted EBIT for the quarter totaled $20.9 million, down 29.4% from the prior-year level of $29.6 million.

Balance Sheet

As of Nov 30, 2021, RPM International had cash and cash equivalents of $192.9 million compared with $246.7 million at fiscal 2021-end. Total liquidity (as of Nov 30, 2021), including cash and revolving credit facilities, was $1.32 billion compared with $1.46 billion on May 31, 2021.

Long-term debt (excluding current maturities) at quarter-end was $2.16 billion compared with $2.38 billion at fiscal 2021-end. Cash provided by operations amounted to $159.4 million for the first six months of 2021, down from $579.5 million in the year-ago period.

Outlook

The company continues to expect robust demand for its paints, coatings, sealants and other building materials for third-quarter fiscal 2022. Yet, supply chain challenges and raw material shortages are expected to increase due to disruptions from the COVID-19 Omicron variant.

For third-quarter fiscal 2022, RPM International expects sales to increase in double digits from third-quarter fiscal 2021. It anticipates CPG and PCG segments to witness sales growth in double digits. The company expects SPG sales to grow in low-double digits. Consumer Group is expected to witness low-single-digit sales growth, given tough year-over-year comparison.

Consolidated adjusted EBIT is expected to decrease 5-15% from the year-ago quarter.

RPM International expects fiscal third-quarter earnings to reflect the ongoing raw material, freight, and wage inflation as well as the impact on sales volumes from operational disruptions due to the Omicron variant of COVID-19 and raw material shortages.

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 -13.33% due to these changes.

VGM Scores

Currently, RPM International has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 #4 (Sell). We expect a below average return from the stock in the next few months.