Back to top

Image: Bigstock

RPM International (RPM) Q1 Earnings & Sales Top, Shares Rise

Read MoreHide Full Article

RPM International Inc. (RPM - Free Report) reported impressive results in first-quarter fiscal 2023 (ended Aug 31, 2022), with earnings and sales surpassing their respective Zacks Consensus Estimate and increasing on a year-over-year basis.

The upside was driven by the continued implementation of MAP operational improvement initiatives, double-digit sales growth across the segments and strong pricing offset supply chain woes, cost inflation, macroeconomic challenges and foreign exchange headwinds.

Shares of this specialty chemicals manufacturer jumped 3.34% on Oct 5.

About the quarterly results, Frank C. Sullivan, RPM’s chairman and CEO, stated, “While the global macroeconomic outlook is uncertain, we believe that our MAP 2025 initiatives, diversified business model and strategic focus on maintenance and restoration position us well for the future.”

Inside the Headlines

For the fiscal first quarter, RPM International reported adjusted earnings of $1.47 per share, which topped the consensus mark of $1.31 by 12.2% and increased 36.1% from the year-ago quarter’s profit of $1.08.

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


Net sales of $1,932.3 million also surpassed the consensus mark of $1,889 million by 2.3% and increased 17.1% from the prior-year level. The uptrend was mainly driven by improved material supply via insourcing and qualifying new suppliers and strong pricing that offset foreign exchange headwinds and cost inflation. Demand was strong in the United States and emerging markets, while the European market was weak as it experienced high inflation and other macroeconomic headwinds.

Organic sales contributed 19.5% and acquisitions added 1% to total sales growth, partially offset by currency headwinds of 3.4%.

Adjusted EBIT in the reported quarter increased 33.1% year over year to $275.3 million, owing to from MAP 2025 savings.

Segmental Details

Construction Products Group or CPG: In the reported quarter, segment sales increased 13.2% from a year ago to $729.7 million, owing to 15.8% organic growth and 1.9% contribution from buyouts. The uptrend can be attributable to robust roofing systems, which benefited from increased public sector spending, its turn-key service model and focus on renovations. Admixtures and repair products for concrete as well as pricing management and strength in Asia-Pacific markets also contributed to growth. Foreign currency translation dented sales by 4.5%. Adjusted EBIT was $111.2 million, down 5.1% year over year.

Performance Coatings Group or PCG: Segment sales increased 19.2% from a year ago to $340.4 million, owing to a 23.6% rise in organic sales. Foreign currency translation reduced sales by 4.4%. Flooring systems, protective coatings and fiberglass-reinforced plastic grating generated record double-digit sales growth. Also, strong energy market demand, emerging markets’ strength, improved pricing and sales management contributed to the top line. Adjusted EBIT increased 27.6% on a year-over-year basis to $47.9 million.

Consumer Group: Sales in the segment grew 22.5% year over year to $659.5 million, owing to a 24.1% contribution from organic sales and 0.4% from the acquisition. Yet, unfavorable foreign currency translation impacted sales by 2%. The upside was driven by an improved supply of key alkyd resins and a price increase. The segment’s adjusted EBIT rose a whopping 149.6% from the prior year’s level to $117.1 million driven by MAP operational initiatives and a solid contribution from the Consumer Group segment.

Specialty Products Group or SPG: The segment’s sales totaled $202.7 million, which increased 11.3% on a year-over-year basis owing to a 12.8% rise in organic sales. Acquisitions contributed 0.65% to sales, but unfavorable foreign currency translation reduced sales by 2.1%. Solid performance in the food coatings and additives business and growth in the disaster restoration business contributed to the result. Adjusted EBIT for the quarter totaled $29.6 million, up 18.9% from the prior-year level.

Balance Sheet

As of Aug 31, 2022, RPM International had total liquidity of $1.15 billion, including cash and cash equivalents of $197.6 million compared with $213.2 million at the fiscal 2022-end. On Aug 1, RPM increased its revolving credit facility to $1.35 billion from $1.30 billion and extended the term of the facility to Aug1, 2027.

Long-term debt (excluding current maturities) at quarter-end was $2.53 billion compared with $2.43 billion at fiscal 2022-end. Cash provided by operations amounted to $23.6 million for first-quarter fiscal 2023, down from $76.1 million in the year-ago period.

Fiscal Q2 Outlook

For second-quarter fiscal 2023, RPM International expects sales to increase 9-12% year over year. The company expects sales growth at CPG in the high-single-digit as commercial and infrastructure construction activity is likely to remain positive and pricing management will contribute to growth, partially offset by macroeconomic weakness in Europe.

PCG sales are anticipated to increase in the high-single-digit to low-double-digit driven by strength in energy markets, reshoring of manufacturing to the U.S. and government infrastructure spending.

SPG revenue is expected to be up in the high-single-digit, benefiting from continued strength in food coatings and additives. The Consumer Group’s sales are likely to be up in the teen as a result of improved material supply, pricing management, and a favorable comparison to the second-quarter fiscal 2022 when sales were depressed by alkyd resin shortages from an explosion at a supplier’s plant.

Consolidated adjusted EBIT is expected to increase 30-40% from the year-ago period’s levels.

Zacks Rank & Key Picks

RPM International currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Advanced Drainage Systems, Inc. (WMS - Free Report) : Headquartered in Hilliard, OH, this company provides innovative water management solutions in stormwater and on-site septic wastewater industries. Despite a challenging operating environment, the material conversion strategy, complete water management solutions and focus on key sales programs have been driving Advanced Drainage Systems’ growth.
WMS currently carries a Zacks Rank #1 (Strong Buy). Earnings estimates for fiscal 2023 have increased to $6.39 per share from $4.23 over the past 60 days. The estimated figure calls for an 79.5% increase from the year-ago period.

Boise Cascade Company (BCC - Free Report) : Boise, ID-based Boise Cascade — which makes wood products and distributes building materials in the United States and Canada — is aided by favorable commodity wood products, pricing and robust construction activity.

Boise Cascade currently carries a Zacks Rank #1. Earnings estimates for 2022 have moved north to $20.48 per share from $20.06 over the past 30 days. The estimated figure calls for an 14% increase from the year-ago period.

Dycom Industries, Inc. (DY - Free Report) : Dycom Industries is benefiting from the higher demand for network bandwidth and mobile broadband, extended geography, proficient program management and network planning services. Dycom expects considerable opportunities across a broad array of customers.

Dycom currently carries a Zacks Rank #1. Earnings estimates for 2022 have moved north to $3.68 per share from $3.28 over the past 60 days. The estimated figure calls for an 142.1% increase from the year-ago period.

Published in