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Why Is RPM International (RPM) Down 2.8% Since Last Earnings Report?
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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 2.8% 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 Q1 Earnings & Sales Top
RPM International Inc. 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.
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.
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: 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: 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: 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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 9.39% due to these changes.
VGM Scores
Currently, RPM International has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise RPM International has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is RPM International (RPM) Down 2.8% Since Last Earnings Report?
It has been about a month since the last earnings report for RPM International (RPM - Free Report) . Shares have lost about 2.8% 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 Q1 Earnings & Sales Top
RPM International Inc. 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.
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.
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: 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: 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: 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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 9.39% due to these changes.
VGM Scores
Currently, RPM International has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise RPM International has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.