RPM International Inc. RPM is slated to report second-quarter fiscal 2025 results on Jan. 7 before the opening bell.
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In the last reported quarter, RPM’s adjusted earnings of $1.84 per share met the consensus mark by 4.6% and increased 12.2% from the year-ago period. Net sales of $1.97 billion missed the consensus mark of $2.02 billion by 2.4% and slipped 2.1% from the prior year’s level of $2.01 billion.
The company’s earnings topped analysts’ expectations in two of the trailing four quarters, met in one and missed on another occasion, with the average surprise being 3%.
How Are Estimates Placed for RPM?
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $1.35 per share over the past 60 days. The estimated value indicates a 10.7% increase from the year-ago earnings of $1.22 per share.
The consensus mark for revenues is $1.78 billion, indicating a 0.5% year-over-year decline.
RPM International Inc. Price and EPS Surprise
RPM International Inc. price-eps-surprise | RPM International Inc. Quote
Factors to Shape RPM’s Q2 Results
RPM’s fiscal second-quarter net sales are likely to have remained almost flat from the prior year’s levels, reflecting the ongoing challenges in the economic environment and varying end-market dynamics, with growth mainly coming from Construction Products Group (CPG) given its focus on restoration, building envelope systems, and differentiated turnkey offerings. The company is benefiting from infrastructure spending and investments in commercial and residential repair and maintenance. However, delays in a few large projects, weakness in certain specialty original equipment manufacturer or OEM markets and softness in demand in Do-It-Yourself or DIY are expected to have weighed on the company’s quarterly sales. That said, strong pricing and MAP 2025 benefits are expected to have added to the positives.
Buoyed by the above-mentioned headwinds, for the fiscal second quarter, RPM expects sales to be approximately flat compared to the record year-ago quarter’s sales.
Segment-wise, the CPG segment (which contributed 36.8% to fiscal 2024 net sales) is expected to see low single-digit revenue growth. This growth will likely stem from high-performance roofing and wall systems that serve both restoration and new construction projects. These results are expected to have benefited from ongoing demand in infrastructure and data center markets, which have proven resilient even amid broader economic uncertainties. Our model predicts CPG sales to grow 2.1% year over year.
Consumer Group (CG) sales (which contributed 33.5% to fiscal 2024 net sales) are projected to decline by low single digits. This segment continues to grapple with weak DIY demand in retail stores and inventory reductions by major customers. Despite these challenges, growth in international markets, driven by targeted marketing initiatives, and the rationalization of lower-margin products are anticipated to have bolstered margins even as sales decline. Our model predicts CG sales to decline 3.3% year over year in the quarter.
Performance Coatings Group (PCG) sales (which contributed 19.9% to fiscal 2024 net sales) are anticipated to be flat. While this segment has shown strength in certain areas, such as flooring, growth will likely be offset by challenges, including previously announced divestitures and lingering foreign exchange headwinds. However, improved sales management systems are poised to provide support for stabilizing results. Our model predicts PCG sales to grow 0.5% year over year in the quarter.
Specialty Products Group (SPG) sales (which contributed 9.7% to fiscal 2024 net sales) are expected to decline by low single digits. Residential-focused OEM markets, which have been under pressure, remain a drag on performance. Nevertheless, signs of stabilization in other OEM businesses offer a glimmer of optimism. Additionally, the group's focus on new business opportunities and operational efficiencies may help mitigate some of the volume-related challenges. Our model predicts SPG sales to decline 4% year over year in the quarter.
The company’s ongoing MAP 2025 cost-saving measures, such as plant consolidations and streamlining SG&A, will help improve margins and offset flat or declining sales. RPM anticipates its fiscal second-quarter adjusted EBIT to rise in the mid-single digits from the year-ago period.
What Our Model Indicates for RPM
Our proven model does not conclusively predict an earnings beat for RPM International this time around. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.
Earnings ESP: The company’s earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: RPM International currently carries a Zacks Rank #2.
Stocks With a Favorable Combination
According to our model, here are some companies in the broader construction sector that have the right combination of elements to post an earnings beat in the quarter to be reported.
Weyerhaeuser WY has an Earnings ESP of +27.27% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
WY’s earnings topped the consensus mark in three of the last four quarters and missed on one occasion, the average being 41.6%. Earnings for the to-be-reported quarter are expected to decline 62.5% year over year.
Patrick Industries, Inc. PATK has an Earnings ESP of +1.85% and a Zacks Rank #3.
PATK’s earnings topped the consensus mark in three of the last four quarters and missed on one occasion, the average being 11.4%. Earnings for the to-be-reported quarter are expected to decline 49.5% year over year.
PotlatchDeltic Corporation PCH has an Earnings ESP of +420.00% and carries a Zacks Rank #3.
PCH’s earnings topped the consensus mark in two of the last four quarters, met in one and missed on another, the average being 50%. The company is expected to report a loss of 1 cent for the to-be-reported quarter.
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