RPM International (RPM) Q1 Earnings & Sales Top, Stock Up
RPM International Inc. RPM reported first-quarter fiscal 2024 (ended Aug 31, 2023) results, with earnings and sales beating the Zacks Consensus Estimate.
The company reported solid quarterly results, with record-breaking sales and an all-time high in adjusted EBIT. This remarkable achievement represents the seventh consecutive quarter of setting new records in both quarterly sales and adjusted EBIT. The growth is driven by its focus on achieving the margin goals outlined in MAP 2025 and effectively utilizing its competitive advantages.
Shares of this specialty chemicals manufacturer rose 6.3% on Oct 4.
Inside the Headlines
RPM reported adjusted earnings of $1.64 per share. The figure topped the consensus mark of $1.56 by 5.1% and increased 11.6% from the year-ago quarter’s profit of $1.47 per share.
Net sales of $2.01 billion beat the consensus mark of $1.96 billion by 2.5% and increased 4.1% from the prior year’s level. In the fiscal first quarter, three out of four segments achieved record-breaking sales, largely attributed to the continued effect of price hikes introduced during fiscal 2023 in response to inflation.
RPM International Inc. Price, Consensus and EPS Surprise
RPM International Inc. price-consensus-eps-surprise-chart | RPM International Inc. Quote
The overall volume across the company saw a modest increase, with notable contributions from businesses strategically positioned to capitalize on heightened investments in building maintenance, infrastructure development, and the reshoring of capital projects. However, this growth was somewhat offset by weaknesses observed in specialty OEM markets and specific customers maintaining inventories below their historical norms.
Organic sales contributed 3.9%, acquisitions added 0.1% to total sales growth, and foreign currency translation positively impacted sales by 0.1%.
From a geographical perspective, Latin America and Africa/Middle East experienced robust double-digit growth, which stemmed from sustained demand for engineered solutions related to infrastructure projects. Meanwhile, European sales recorded an impressive nearly 10% increase, primarily fueled by notable enhancements in construction-related businesses.
Adjusted EBIT increased 12.3% year over year to $309 million, marking an all-time record of adjusted EBIT. The margin expansion was driven by higher sales, gains from MAP 2025 initiatives, and enhanced efficiency in managing fixed costs, particularly within its Construction Products Group segment. Adjusted EBIT margin improved 120 basis points year over year to 15.4%.
Segmental Details
Construction Products Group: In the reported quarter, segment sales increased 10.8% from a year ago to a historically high sales of $782.8 million, owing to a 9.5% organic growth and 0.6% contribution from buyouts. Foreign currency translation also contributed 0.7% to sales growth. Growth was driven by the robust performance of restoration systems designed for roofing, facades, and parking structures, strategic emphasis on repair and maintenance and a distinctive service model. Furthermore, concrete admixtures and repair products experienced substantial growth, driven by heightened demand for engineered solutions catering to infrastructure projects and the reshoring of various initiatives. In addition, European businesses also registered significant growth.
Adjusted EBIT of $144.6 million was up 33% year over year due to volume growth, which resulted in improved fixed-cost utilization and benefits from MAP 2025 initiative.
Performance Coatings Group: Segment sales increased 4.1% year over year to $378.5 million, owing to a 4% rise in organic sales and 0.8% from acquisitions. Foreign currency translation reduced sales by 0.7%. The increase in sales was primarily propelled by the expansion of flooring systems and other segments catering to infrastructure projects and the reshoring of capital projects through engineered solutions. On a geographical scale, international demand remained robust, further boosting sales figures. Additionally, the implementation of increased pricing strategies played a role in contributing to growth.
Adjusted EBIT increased 17.4% on a year-over-year basis to $59.1 million. The growth was driven by sales growth and MAP 2025 benefits, led by commercial excellence programs in Europe and commodity cycle benefits.
Consumer Group: Sales in the segment grew 1.5% year over year to $669.6 million, owing to a 1.7% contribution from organic sales. Yet, unfavorable foreign currency translation impacted sales by 0.2%. The upside was driven by increased selling prices to catch up with continued cost inflation. The segment’s adjusted EBIT rose 3.5% from the prior year’s level to $121.2 million, driven by MAP 2025 operational initiatives and strong sales.
Specialty Products Group (SPG): The segment’s sales totaled $181 million, down 10.7% on a year-over-year basis owing to a 9% decline in organic sales. Also, unfavorable foreign currency translation and divestitures net of acquisitions reduced sales by 0.5% and 2.2%, respectively. Lower volumes at businesses supplying OEM markets, including windows, doors, furniture and cabinets, negatively impacted the results of SPG.
Adjusted EBIT for the quarter totaled $17.9 million, down 39.6% from the prior-year level. The decline in sales, product mix, and unfavorable fixed-cost leverage at plants impacted the results.
Balance Sheet
As of Aug 31, 2023, RPM International had a total liquidity of $1.23 billion. This includes cash and cash equivalents of $240.6 million compared with $201.7 million at the fiscal 2022-end.
Long-term debt (excluding current maturities) at the quarter-end was $2.5 billion compared with $2.69 billion at the fiscal 2022-end. Cash provided by operations amounted to $359.2 million (an all-time high) for the quarter, up from $23.6 million in the year-ago period.
Fiscal 2024 Outlook
For the fiscal second quarter, the company expects sales growth of low-single digits and adjusted EBIT growth between high-single and low-double digits.
For fiscal 2023, the company anticipates consolidated sales to grow by a mid-single-digit percentage from a year ago. Furthermore, it expects consolidated adjusted EBIT to grow in the low-double-digit to mid-teen percentage range. This growth is expected to be more pronounced in the second half of the fiscal year, provided that there is no economic recession.
Zacks Rank & Recent Construction Releases
RPM International currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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