RPM International (RPM) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Since a chang ...

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| --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|------------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal 2025 | | | | | | | | First-Quarter Results | | | | | | | | | | | | | | | | October 2, 2024 | | Forward-Looking Statements & Regulation G This presentation contains "forward-looking statements" relating to our business. These forward-looking statements, or other statements made by us, are made based on our exp ...

Company Overview - RPM International is a diversified coating company specializing in construction sealants and adhesives, performance coating, and rust-preventative and industrial coating [1] Investment Thesis - The construction and consumer coating businesses of RPM are expected to accelerate as the economy normalizes [1] - A 'Buy' rating is initiated for RPM with a one-year target [1] Investment Strategy - The investment approach is fundamental, bottom-up, long-term, and quality growth-oriented, focusing on companies in niche markets with strong growth potential [1] - The portfolio typically consists of 15-20 stocks, emphasizing diversification, risk management, macro-driven sector weights, and disciplined trading and valuations [1] - The target is to achieve a 15% annual return in the portfolio [1]

Financial Data and Key Metrics Changes - RPM International reported a sales decline of 2.1% driven by foreign exchange headwinds and a slight decline in organic revenue, while adjusted EBIT grew 6.3% to a record for the first quarter, supported by MAP 2025 benefits [11][12] - Adjusted EPS increased by 12.2% to a record $1.84, attributed to adjusted EBIT growth and lower interest expenses from debt repayments [8][11] Business Line Data and Key Metrics Changes - The Construction Products Group (CPG) led growth by focusing on repair and maintenance businesses, achieving record Q1 adjusted EBIT due to improved fixed cost leverage and MAP 2025 benefits [9][13] - The Performance Coatings Group (PCG) experienced positive organic growth driven by the flooring business, with adjusted EBIT also reaching a first quarter record [13] - The Specialty Products Group (SPG) faced sales declines due to soft demand in specialty OEM markets, but adjusted EBIT grew as MAP 2025 benefits offset lower volumes [14] - The Consumer Group continued to face weak DIY demand, resulting in sales declines, although adjusted EBIT margin expanded due to rationalization of lower-margin products [15] Market Data and Key Metrics Changes - Sales in North America declined, reflecting overall company trends, while Europe faced declines due to FX headwinds and divestitures, although profitability improved [12] - Emerging markets saw pronounced FX headwinds, particularly in Latin America, while Asia Pacific and Africa/Middle East experienced growth from infrastructure spending [12] Company Strategy and Development Direction - RPM International is focused on executing MAP 2025 initiatives to capture growth opportunities and improve operational efficiencies, which have led to record adjusted EBIT for 11 consecutive quarters [7][10] - The company is investing in a new production facility in Belgium to enhance supply chain resiliency and support all four segments [17] - The strategic pivot towards growing end markets, such as data centers, is expected to drive future growth [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about navigating the mixed economic environment and highlighted the potential for growth as interest rates decline, which could lead to a recovery in housing turnover [31][39] - The outlook for the second quarter anticipates flat sales compared to the prior year, with expectations of low single-digit revenue growth in CPG and declines in SPG and Consumer Group [20][21] Other Important Information - The company repaid $75 million in debt during the quarter, contributing to lower interest expenses and strong cash flow generation [8][17] - The MAP 2025 program is on track to achieve projected savings, with a focus on operational efficiency and cost management [36] Q&A Session Summary Question: Consumer margins performance and operating leverage - Management noted that efficiencies gained through MAP initiatives have improved operating leverage, positioning the company for growth when volumes return [26][27] Question: Specialty segment inventory issues - Management indicated that the Specialty segment has returned to positive EBIT growth, suggesting that sales challenges have bottomed out [28][29] Question: Pricing expectations for fiscal 2025 - Management expects pricing to be slightly positive, with a target of around 1% for the fiscal year, contingent on stable raw material costs [30][31] Question: Capital deployment strategy - The company remains committed to a balanced capital allocation model, focusing on internal growth, acquisitions, and returning capital to shareholders [34][35] Question: MAP program execution status - Management reported strong progress in the MAP program, with expectations to meet or exceed the original savings targets [36][37] Question: Consumer segment performance and inventory levels - Management acknowledged ongoing challenges in the Consumer segment but expressed confidence in future recovery as inventory levels normalize [39] Question: Data center opportunities and backlog - Management highlighted strong backlogs in industrial segments, despite some project delays, indicating a positive outlook for data center construction [40][41] Question: SKU rationalization in Consumer Group - Management discussed the closure of a low-margin architectural paint plant in Europe as part of ongoing SKU rationalization efforts [43][44] Question: Pricing pressures across business units - Management confirmed modest pricing adjustments in response to raw material cost fluctuations, maintaining strong margin profitability [48][49]

Core Viewpoint - RPM Inc is experiencing a positive market response despite missing Q1 revenue estimates and projecting flat Q2 revenue growth, indicating investor confidence in the company's long-term strategy and resilience in challenging market conditions [1][4]. Financial Performance - RPM reported a Q1 revenue of $1.97 billion, reflecting a 2.1% decline year-over-year, but the flat revenue outlook for Q2 is seen as an improvement [2][3]. - The company achieved a 12.2% year-over-year increase in earnings per share to $1.84, marking its third consecutive quarter of earnings upside [3]. Segment Performance - RPM's Construction Products Group (CPG) and Performance Coatings Group (PCG) led the performance in Q1, with CPG showing a 1.4% year-over-year sales growth driven by roofing and wall systems [3]. - PCG experienced a 1.8% decline in sales, which was still better than the overall sales drop, supported by maintenance and restoration projects [3]. - Specialty Products Group (SPG) and Consumer Group faced revenue declines of 3.5% and 6.1% year-over-year, respectively, due to weak residential markets [3]. Strategic Initiatives - The company is focusing on its MAP 2025 initiatives, which aim to streamline SG&A, pivot to growth markets, and invest in targeted opportunities, resulting in a record for adjusted operating margins in Q1 [3]. - Management remains optimistic about the second half of the year, reiterating a low-single-digit revenue growth forecast for FY25 despite early shortfalls [2][3]. Market Conditions - RPM is navigating a tough operating environment characterized by sticky inflation, sluggish commercial construction, and delays in large construction projects [1][3]. - Management noted potential optimism from declining interest rates but cautioned that it is too early to predict increased housing turnover [3].

Stock Performance - RPM International Inc shares increased by 7.91% during mid-day trading on October 2, reaching an intraday high of $129.69 before settling at $129.59, up from a previous close of $120.09 [1] - The current stock price is 0.08% below its 52-week high of $129.69 and 45.87% above its 52-week low of $88.84 [1] - Trading volume was 631,665 shares, which is 92.5% of the average daily volume of 682,540 [1] Analyst Forecasts - The average one-year price target for RPM International Inc, based on estimates from 14 analysts, is $123.12, indicating a potential downside of 4.99% from the current price of $129.59 [2] - The highest price estimate is $140.00, while the lowest is $107.00 [2] - The average brokerage recommendation from 17 firms is 2.7, suggesting a "Hold" status on the stock [2] Valuation Estimates - GuruFocus estimates the GF Value for RPM International Inc in one year to be $104.20, indicating a downside of 19.59% from the current price of $129.59 [2] - GF Value is derived from historical multiples, past business growth, and future performance estimates [2]

Core Insights - RPM International reported $1.97 billion in revenue for the quarter ended August 2024, a year-over-year decline of 2.1% [1] - The company's EPS for the same period was $1.84, compared to $1.64 a year ago, indicating a positive year-over-year change [1] - The reported revenue fell short of the Zacks Consensus Estimate of $2.02 billion, resulting in a surprise of -2.40% [1] - The company delivered an EPS surprise of +4.55%, with the consensus EPS estimate being $1.76 [1] Revenue Performance by Segment - Net Sales for the Construction Products Group (CPG) were $793.99 million, slightly below the average estimate of $801.62 million, representing a year-over-year change of +1.4% [3] - Net Sales for the Specialty Products Group (SPG) were $174.57 million, compared to the average estimate of $178.37 million, reflecting a year-over-year decline of -3.5% [3] - Net Sales for the Consumer Segment were $628.47 million, below the average estimate of $657.24 million, showing a year-over-year decrease of -6.1% [3] - Net Sales for the Performance Coatings Group (PCG) were $371.76 million, compared to the average estimate of $378.72 million, indicating a year-over-year decline of -1.8% [3] Adjusted EBIT Performance - Adjusted EBIT for the Consumer Segment was $116.21 million, below the average estimate of $128.46 million [3] - Adjusted EBIT for the Specialty Products Group (SPG) was $18.11 million, exceeding the average estimate of $17.26 million [3] - Adjusted EBIT for the Performance Coatings Group (PCG) was $64.59 million, slightly below the average estimate of $65.66 million [3] - Adjusted EBIT for the Construction Products Group (CPG) was $159.90 million, above the average estimate of $150.38 million [3] - Adjusted EBIT for Corporate/Other was -$30.48 million, better than the average estimate of -$38.33 million [3] Stock Performance - RPM International's shares have returned +4% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [4] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [4]

Company Performance - RPM International reported quarterly earnings of $1.84 per share, exceeding the Zacks Consensus Estimate of $1.76 per share, and up from $1.64 per share a year ago, representing an earnings surprise of 4.55% [1] - The company posted revenues of $1.97 billion for the quarter ended August 2024, which missed the Zacks Consensus Estimate by 2.40%, and decreased from $2.01 billion year-over-year [2] - Over the last four quarters, RPM International has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Market Performance - RPM International shares have increased approximately 7.6% since the beginning of the year, while the S&P 500 has gained 19.7% [3] - The current Zacks Rank for RPM International is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.35 on revenues of $1.82 billion, and for the current fiscal year, it is $5.49 on revenues of $7.48 billion [7] - The estimate revisions trend for RPM International is mixed, and changes in earnings expectations may occur following the recent earnings report [6] Industry Context - The Paints and Related Products industry, to which RPM International belongs, is currently ranked in the top 7% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, Sherwin-Williams, is expected to report quarterly earnings of $3.55 per share, reflecting a year-over-year increase of 10.9%, with revenues anticipated to be $6.26 billion, up 2.3% from the previous year [9][10]