RPM International Beats Earnings

This morning, RPM International (RPM) reported fiscal third-quarter earnings of 23 cents per share. That beat estimates by two cents per share. This is for the three months ending on February 29 so it was before the coronavirus become a major business issue.

Previously, RPM said it expected EPS “in the high-teens to low-20-cent range.” Three weeks ago, RPM revised that to say it expects to see earnings “at the higher end” of its previous range. They were right on that.

For Q3, adjusted EBIT rose 30.4% to $60.5 million and net sales increased by 2.9% to $1.17 billion. Due to the coronavirus, RPM has decided to suspend its guidance. They’re also canceling any share buybacks.

On the bright side, the company made it clear that they’re “well positioned to weather the pandemic due to strong balance sheet, significant liquidity, maintenance nature of products, potential for DIY uptick, and margin improvements from restructuring.” At the end of the quarter, RPM has a position of cash and revolving credit of $1.14 billion.

RPM’s business is divided into four groups. For Q2, Construction Products had a sales increase of 4.7%. Performance Coatings rose by 1%. The Consumer Group was up 5.4%. Specialty Products, the smallest group, was the laggard as organic sales fell 7.1%.

RPM’s Chairman and CEO Frank C. Sullivan said:

“We are pleased with our top-line growth during the third quarter, which typically generates our most modest results each year because it falls during the winter months, when painting and construction activity slow. Market share gains and pricing contributed to organic sales growth of 3.0%. This was partially offset by foreign currency translation of 0.8%, while acquisitions contributed 0.7% to sales. Our year-to-date cash flow from operations improved by $236 million over last year due to better working capital management and margin improvement from our MAP to Growth program.”

For the nine months so far of this fiscal year RPM has a sales increase of 2.1% to $4.05 billion. Organic growth is up 2.0%, acquisitions added 1.3% and forex reduced sales by 1.2%. For the first nine months of the year, RPM earned $1.94 per share.

The previous full-year guidance, which is now canceled, was for earnings between $3.30 and $3.42 per share. RPM said it expects to see a sales drop for Q4 of 10% to 15%.

The stock is currently up about 4% today. RPM owns Rust-Oleum and makes lots of workshop products. The company has raised its dividend every year since 1973.

Posted by on April 8th, 2020 at 2:36 pm


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