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RPM International (RPM) Q3 Earnings & Sales Beat Estimates
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RPM International Inc. (RPM - Free Report) reported third-quarter fiscal 2024 (ended Feb 29, 2024) results, with earnings and sales beating the Zacks Consensus Estimate. Both metrics increased on a year-over-year basis.
Shares of RPM lost 2.6% following the earnings release on Apr 4, 2024.
Inside the Headlines
RPM reported adjusted earnings per share (EPS) of 52 cents. The figure surpassed the consensus mark of 48 cents by 8.3% and increased 40.5% from the year-ago quarter’s profit of 37 cents per share.
Net sales of $1.52 billion topped the consensus mark of $1.51 billion by 0.8%. The quarterly figure inched up 0.4% from the prior year’s level. In the fiscal third quarter, two out of four segments achieved higher sales.
In the fiscal third quarter, sales soared to an all-time high, buoyed by favorable pricing across all sectors, effectively offsetting inflationary pressures. Particularly robust was the volume growth in sectors catering to infrastructure, reshoring initiatives, and high-performance construction projects, thanks to tailored engineered solutions. Additionally, the timely completion of projects contributed significantly to this surge. However, this growth was somewhat tempered by reduced consumer uptake in do-it-yourself (DIY) products at retail outlets, as well as demanding year-over-year comparisons within the disaster restoration segment.
Sales experienced a 0.9% organic growth, partially offset by a 0.1% decline due to divestitures net of acquisitions, and a further 0.4% decrease attributed to foreign currency translation effects.
From a geographical perspective, emerging markets showed the most robust growth, with Africa/Middle East witnessing a remarkable increase of 22.9% and Latin America experiencing a notable uptick of 13.5%. The expansion in these regions was primarily propelled by the demand for engineered solutions tailored to infrastructure projects.
Adjusted EBIT increased 31.3% year over year to $110.1 million. Adjusted EBIT margin improved 170 basis points year over year, attributable to MAP 2025 initiatives, including the commodity cycle, a positive mix from shifting toward higher margin products and services, and improved fixed-cost leverage at businesses with volume growth.
RPM International Inc. Price, Consensus and EPS Surprise
Construction Products Group or CPG: In the reported quarter, segment sales increased 4.3% from a year ago to $495.8 million, owing to a 3.1% organic growth and 0.7% contribution from buyouts. Foreign currency translation also contributed 0.5% to sales growth. CPG attained its highest-ever sales in the fiscal third quarter, driven by robust performance in concrete admixtures and repair products. This surge was fueled by heightened demand for engineered solutions catering to infrastructure projects and reshoring initiatives, alongside gains in market share. Furthermore, businesses involved in high-performance building construction and renovation demonstrated strong performance. Notably, Latin American markets experienced a significant uptick in sales, primarily fueled by infrastructure-related demand.
Adjusted EBIT of $20.5 million was up 69.8% year over year due to volume growth, which resulted in improved fixed-cost utilization and benefits from the MAP 2025 initiative.
Performance Coatings Group: Segment sales increased 6.9% year over year to $343.5 million. Sales comprised a 9.2% organic growth, offset slightly by a 0.7% decline due to divestitures, and further impacted by a 1.6% headwind from currency translation effects.
The increase in sales was primarily propelled by growth in engineered turnkey flooring systems serving reshoring capital projects and market share gains. On a geographical scale, strong growth in Asia/Pacific and Africa/Middle East added to the positives.
Adjusted EBIT increased 45.1% on a year-over-year basis to $47.1 million. The growth was driven by sales growth and MAP 2025 benefits.
Consumer Group: Sales in the segment declined 4% year over year to $507.2 million, owing to a decrease in consumer purchases for DIY items at retail stores. The decrease was primarily influenced by reduced DIY consumer purchases at retail outlets, customers opting for leaner inventory management, and the strategic streamlining of lower-margin products. However, these declines were partially offset by gains in market share. Organic sales declined 3.2%. Unfavorable foreign currency translation impacted sales by 0.8%.
The segment’s adjusted EBIT rose 34.6% from the prior year’s level to $65 million, facilitated by the advantages of MAP 2025, which encompasses the commodity cycle, and the strategic trimming of lower-margin products. However, this was partially mitigated by under absorption resulting from decreased volumes and increased expenses related to compensation and benefits.
Specialty Products Group (SPG): The segment’s sales totaled $176.5 million, down 7.6% on a year-over-year basis, owing to a 6.4% decline in organic sales. Yet, foreign currency translation contributed to 0.2% sales growth. Divestitures (net of acquisitions) reduced sales by 1.4%.
Adjusted EBIT for the quarter totaled $12.1 million, down 27.9% from the prior-year level. Adjusted EBIT was negatively impacted by the sales decline.
Balance Sheet
As of Feb 29, 2024, RPM International had a total liquidity of $1.29 billion. This includes cash and cash equivalents of $248.9 million compared with $215.8 million at the fiscal 2023-end.
Long-term debt (excluding current maturities) at the fiscal third-quarter end was $2.19 billion compared with $2.51 billion at the fiscal 2023-end. Cash provided by operations amounted to $941.1 million for the first nine months of 2024, up from $263 million in the year-ago period.
Fiscal 2024 Outlook
For the fiscal fourth quarter, the company expects sales growth to be flat year over year and adjusted EBIT to increase in the high-single-digit percentage range.
For fiscal 2024, the company anticipates that consolidated sales will rise toward the middle point of the earlier forecast, representing growth in the low-single-digit percentage range compared to the previous year's record results. Also, the company anticipates that consolidated adjusted EBIT will rise toward the middle point of the previous forecast, reflecting an increase in the low-double-digit to mid-teen percentage range compared to the record results of the prior year.
Zacks Rank and Key Picks
RPM International currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the Zacks Construction sector are:
VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 29.9% in the past six months. The Zacks Consensus Estimate for VMC’s 2024 sales and EPS indicates an improvement of 1.3% and 19.7%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have soared 45.3% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.
NVR, Inc. (NVR - Free Report) currently carries a Zacks Rank #2 (Buy). NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 33% in the past six months.
The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
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RPM International (RPM) Q3 Earnings & Sales Beat Estimates
RPM International Inc. (RPM - Free Report) reported third-quarter fiscal 2024 (ended Feb 29, 2024) results, with earnings and sales beating the Zacks Consensus Estimate. Both metrics increased on a year-over-year basis.
Shares of RPM lost 2.6% following the earnings release on Apr 4, 2024.
Inside the Headlines
RPM reported adjusted earnings per share (EPS) of 52 cents. The figure surpassed the consensus mark of 48 cents by 8.3% and increased 40.5% from the year-ago quarter’s profit of 37 cents per share.
Net sales of $1.52 billion topped the consensus mark of $1.51 billion by 0.8%. The quarterly figure inched up 0.4% from the prior year’s level. In the fiscal third quarter, two out of four segments achieved higher sales.
In the fiscal third quarter, sales soared to an all-time high, buoyed by favorable pricing across all sectors, effectively offsetting inflationary pressures. Particularly robust was the volume growth in sectors catering to infrastructure, reshoring initiatives, and high-performance construction projects, thanks to tailored engineered solutions. Additionally, the timely completion of projects contributed significantly to this surge. However, this growth was somewhat tempered by reduced consumer uptake in do-it-yourself (DIY) products at retail outlets, as well as demanding year-over-year comparisons within the disaster restoration segment.
Sales experienced a 0.9% organic growth, partially offset by a 0.1% decline due to divestitures net of acquisitions, and a further 0.4% decrease attributed to foreign currency translation effects.
From a geographical perspective, emerging markets showed the most robust growth, with Africa/Middle East witnessing a remarkable increase of 22.9% and Latin America experiencing a notable uptick of 13.5%. The expansion in these regions was primarily propelled by the demand for engineered solutions tailored to infrastructure projects.
Adjusted EBIT increased 31.3% year over year to $110.1 million. Adjusted EBIT margin improved 170 basis points year over year, attributable to MAP 2025 initiatives, including the commodity cycle, a positive mix from shifting toward higher margin products and services, and improved fixed-cost leverage at businesses with volume growth.
RPM International Inc. Price, Consensus and EPS Surprise
RPM International Inc. price-consensus-eps-surprise-chart | RPM International Inc. Quote
Segmental Details
Construction Products Group or CPG: In the reported quarter, segment sales increased 4.3% from a year ago to $495.8 million, owing to a 3.1% organic growth and 0.7% contribution from buyouts. Foreign currency translation also contributed 0.5% to sales growth. CPG attained its highest-ever sales in the fiscal third quarter, driven by robust performance in concrete admixtures and repair products. This surge was fueled by heightened demand for engineered solutions catering to infrastructure projects and reshoring initiatives, alongside gains in market share. Furthermore, businesses involved in high-performance building construction and renovation demonstrated strong performance. Notably, Latin American markets experienced a significant uptick in sales, primarily fueled by infrastructure-related demand.
Adjusted EBIT of $20.5 million was up 69.8% year over year due to volume growth, which resulted in improved fixed-cost utilization and benefits from the MAP 2025 initiative.
Performance Coatings Group: Segment sales increased 6.9% year over year to $343.5 million. Sales comprised a 9.2% organic growth, offset slightly by a 0.7% decline due to divestitures, and further impacted by a 1.6% headwind from currency translation effects.
The increase in sales was primarily propelled by growth in engineered turnkey flooring systems serving reshoring capital projects and market share gains. On a geographical scale, strong growth in Asia/Pacific and Africa/Middle East added to the positives.
Adjusted EBIT increased 45.1% on a year-over-year basis to $47.1 million. The growth was driven by sales growth and MAP 2025 benefits.
Consumer Group: Sales in the segment declined 4% year over year to $507.2 million, owing to a decrease in consumer purchases for DIY items at retail stores. The decrease was primarily influenced by reduced DIY consumer purchases at retail outlets, customers opting for leaner inventory management, and the strategic streamlining of lower-margin products. However, these declines were partially offset by gains in market share. Organic sales declined 3.2%. Unfavorable foreign currency translation impacted sales by 0.8%.
The segment’s adjusted EBIT rose 34.6% from the prior year’s level to $65 million, facilitated by the advantages of MAP 2025, which encompasses the commodity cycle, and the strategic trimming of lower-margin products. However, this was partially mitigated by under absorption resulting from decreased volumes and increased expenses related to compensation and benefits.
Specialty Products Group (SPG): The segment’s sales totaled $176.5 million, down 7.6% on a year-over-year basis, owing to a 6.4% decline in organic sales. Yet, foreign currency translation contributed to 0.2% sales growth. Divestitures (net of acquisitions) reduced sales by 1.4%.
Adjusted EBIT for the quarter totaled $12.1 million, down 27.9% from the prior-year level. Adjusted EBIT was negatively impacted by the sales decline.
Balance Sheet
As of Feb 29, 2024, RPM International had a total liquidity of $1.29 billion. This includes cash and cash equivalents of $248.9 million compared with $215.8 million at the fiscal 2023-end.
Long-term debt (excluding current maturities) at the fiscal third-quarter end was $2.19 billion compared with $2.51 billion at the fiscal 2023-end. Cash provided by operations amounted to $941.1 million for the first nine months of 2024, up from $263 million in the year-ago period.
Fiscal 2024 Outlook
For the fiscal fourth quarter, the company expects sales growth to be flat year over year and adjusted EBIT to increase in the high-single-digit percentage range.
For fiscal 2024, the company anticipates that consolidated sales will rise toward the middle point of the earlier forecast, representing growth in the low-single-digit percentage range compared to the previous year's record results. Also, the company anticipates that consolidated adjusted EBIT will rise toward the middle point of the previous forecast, reflecting an increase in the low-double-digit to mid-teen percentage range compared to the record results of the prior year.
Zacks Rank and Key Picks
RPM International currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the Zacks Construction sector are:
Vulcan Materials Company (VMC - Free Report) currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 29.9% in the past six months. The Zacks Consensus Estimate for VMC’s 2024 sales and EPS indicates an improvement of 1.3% and 19.7%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have soared 45.3% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.
NVR, Inc. (NVR - Free Report) currently carries a Zacks Rank #2 (Buy). NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 33% in the past six months.
The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.