RPM International Earned $1.02 per Share

This morning, RPM International (RPM) had a dud of an earnings report. The company made $1.02 per share for its fiscal Q4 which was 16 cents below Wall Street’s consensus. Quarterly net sales rose 4.6% to $1.49 billion.

“We took additional cost reduction measures in the fourth quarter to position RPM to a return to double-digit earnings growth in fiscal 2018. We were pleased with solid organic growth in both our industrial and specialty segments during the fourth quarter, which we expect to continue as we enter into fiscal 2018. Organic growth across our consumer businesses was down 1.0%, principally due to lower results at our Kirker nail enamel business, the negative impact of a very rainy start to the spring season for home improvement sales and a difficult comparison to our prior-year quarter in which organic growth across RPM’s core consumer product lines increased 9.9%,” stated Frank C. Sullivan, RPM chairman and chief executive officer.

“The consolidated revenue increase, particularly in a growth-challenged economic environment, was mitigated somewhat on leverage to the bottom line as a result of higher raw material costs during the quarter, including shortages and availability issues in a couple of key product lines. Also, a significantly higher tax rate in the fourth quarter this year versus last year reduced earnings per share on a comparative basis by $0.12.

Now for guidance:

“Based upon the growth expectations above, we anticipate earnings per share for fiscal 2018 to be in the range of $2.85 to $2.95 per share. Throughout the year, it will be important to keep in mind the variability of our year-over-year quarterly comparisons, in particular, our tax rate is estimated to be in line with fiscal 2017, but may fluctuate quarter-to-quarter. Related to this, in the first quarter of last year we had a very favorable tax adjustment, which is not expected to repeat, and which will negatively impact the first quarter of fiscal 2018 by approximately $0.03 per share. As outlined above, in the fiscal 2017 third quarter we identified, but did not adjust out, roughly $0.08 per share of non-operating, one-time items. These items should be added back to the fiscal 2017 base results for our fiscal 2018 third quarter. Given the higher-than-normal tax rate in the fiscal 2017 fourth quarter, we would anticipate $0.05 per share benefit in the fiscal 2018 fourth quarter.

“For the first quarter of fiscal 2018, in addition to the higher tax rate mentioned above, we expect higher raw material costs experienced in the fourth quarter to continue through the first quarter, as well as continued foreign currency headwinds, both translational and transactional. Also, most of our operating groups were on plan in the first quarter of fiscal 2017, before their results began to weaken, and our Brazilian operation benefited in the first quarter last year when Brazil hosted the summer Olympics. As a result, our EPS estimate for the first quarter of fiscal 2018 is $0.83 per share to $0.85 per share.

Wall Street had been expecting 89 cents per share for this quarter, and $3.00 per share for the year. Shares of RPM are down about 7% today.

Posted by on July 24th, 2017 at 1:04 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.