RPM International Inc. (NYSE:RPM) shares fell 2.8% to US$73.04 in the week since its latest quarterly results. Revenues were in line with forecasts, at US$1.4b, although statutory earnings per share came in 16% below what analysts expected, at US$0.59 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on RPM International after the latest results.
Following last week's earnings report, RPM International's eleven analysts are forecasting 2020 revenues to be US$5.70b, approximately in line with the last 12 months. Statutory earnings per share are expected to soar 27% to US$3.24. Yet prior to the latest earnings, analysts had been forecasting revenues of US$5.69b and earnings per share (EPS) of US$3.18 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 6.2% to US$80.30. It looks as though analysts previously had some doubts over whether the business would live up to their expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values RPM International at US$90.00 per share, while the most bearish prices it at US$71.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that analysts expect RPM International's revenue growth will slow down substantially, with revenues next year expected to grow 1.5%, compared to a historical growth rate of 4.9% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 3.5% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than RPM International.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple RPM International analysts - going out to 2024, and you can see them free on our platform here.
You can also view our analysis of RPM International's balance sheet, and whether we think RPM International is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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