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Category: Stock Market and RPM International
Date: 3 October 2019 Stock Price: $67.26 We take a look at the 1st quarter earnings report of their 2020 fiscal year of RPM International, a seller of speciality coatings, sealants and building materials and related services.
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About RPM International
RPM International Inc. owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services. The company operates across four reportable segments: consumer, construction products, performance coatings and specialty products. RPM has a diverse portfolio with hundreds of market-leading brands, including Rust-Oleum, DAP, Zinsser, Varathane, Day-Glo, Stonhard, Carboline, Tremco and Dryvit. From homes and workplaces, to infrastructure and precious landmarks, RPM’s brands are trusted by consumers and professionals alike to help build a better world. The company employs approximately 15,000 individuals worldwide
Brand leadership affords RPM’s operating companies a number of advantages, including the ability to command premium pricing, shorten sales cycles and gain repeat purchases due to brand loyalty. These benefits are what make brand leadership a key element of RPM’s growth strategy across its consumer, construction products, performance coatings and specialty products segments.
Brand leadership affords RPM’s operating companies a number of advantages, including the ability to command premium pricing, shorten sales cycles and gain repeat purchases due to brand loyalty. These benefits are what make brand leadership a key element of RPM’s growth strategy across its consumer, construction products, performance coatings and specialty products segments.
Overview of RPM International's latest earnings report
- Net sales: $1.472 billion (up from $1.459 billion for the same quarter of the previous year
- Net sales increased by 0.89% over the last 12 months
- Cost of sales: $898.010 million (down from $910.636 million for the same quarter of the previous year)
- Cost of sales decreased by -1.38% over the last 12 months
- Net income: $106.188 million (up from $69.764 million for the same quarter of the previous year)
- Diluted earnings per share: $0.82 (up from $0.52 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 129.504 million (down from 136.430 million for the same quarter of the previous year)
- Cash and cash equivalents: $212.091 million
- Cash and cash equivalents per share: $1.63
- Cash and cash equivalents makes up 2.43% of RPM's market capital
- Cash and cash equivalents makes up 3.79% of RPM's total assets
- Accounts receivable: $1.109 billion
- Accounts receivable makes up 19.8% of RPM's total assets
- Inventories: $860.5 million
- Inventories makes up 15.37% of RPM's total assets
- Stockholders equity of RPM: $1.346 billion
- Stockholders equity per share for RPM : $10.39
- So RPM is trading at 6.47 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at.
RPM International's management commentary on the results and earnings guidance
MEDINA, Ohio--(BUSINESS WIRE)--Oct. 2, 2019-- RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today reported financial results for its fiscal 2020 first quarter ended August 31, 2019.
“We continued to experience the benefits of the plant rationalization, manufacturing improvements and center-led procurement initiatives of our 2020 MAP to Growth operating improvement plan during the quarter. These actions resulted in adjusted EBIT and EPS performance that met our projections despite modest top-line sales growth,” stated RPM chairman and CEO Frank C. Sullivan. “As we anticipated in July, sales growth was modest as a result of an extremely wet June that slowed painting and construction activity in North America and unfavorable foreign exchange. We were encouraged to see our restructuring program drive significant EBIT margin improvement across all of our segments. On a consolidated basis, our adjusted EBIT margin improved 260 basis points.”
“As we communicated last quarter, we have realigned the business into four reportable segments from our previous three segments. The new segments are the Construction Products Group, Performance Coatings Group, Consumer Group and Specialty Products Group,” stated Sullivan. “The objectives of this realignment are to position the business for accelerated growth and to provide our investors with greater visibility into the business and better comparability among our peers. Starting with the current quarter of fiscal 2020, we are reporting our results under this four-segment structure and are providing comparable fiscal 2019 financials that have been recast to reflect the effect of this realignment.”
“The recent acquisitions of Nudura and Schul, as well as last year’s price increases, helped to drive sales growth in the Construction Products Group, despite unfavorable foreign exchange. Impacting our North American businesses were labor shortages and June weather conditions that delayed construction activity. Also contributing to the top line was our basement waterproofing solutions business, as well as a recovery in our Brazilian operation, which generated significant sales growth. The $16.3 million improvement in the segment’s adjusted EBIT was substantially driven by savings from our restructuring program, including management delayering, plant rationalization and improved manufacturing disciplines,” stated Sullivan.
“Savings from our 2020 MAP to Growth plan provided significant earnings leverage in the Performance Coatings Group, driven by a reduction of our operational footprint and strategic decisions to exit low-margin businesses. In addition, the segment has benefited from executing a reorganization and management delayering as it moves towards a global brand management structure,” stated Sullivan.
“The Consumer Group’s improvement in EBIT was largely due to a favorable year-over-year comparison resulting from $10 million in costs associated with legal settlements during the first quarter of fiscal 2019. Results in the first quarter were impacted by market share gains in the prior quarter, which led to higher costs from outsourcing production to service this increased demand. In light of market share gains and expectations for continuing growth, we are investing in new equipment, improving production methods and leveraging RPM’s internal manufacturing network to produce products more efficiently and create greater capacity,” stated Sullivan.
Business Outlook
“For the second quarter of fiscal 2020, we expect sales to be up 2% to 3% with strong leverage to the bottom line for an estimated 20% to 24% adjusted EBIT growth, resulting in adjusted diluted EPS in the low- to mid-70-cent range.
“Looking ahead to our fiscal 2020 third and fourth quarters, it is important to note the seasonality in our business. Historically, our third quarter provides our most modest results each year because it falls during the winter months of December through February, when painting and construction activity slow due to cold and snowy weather. Our fourth-quarter results are generally stronger as work begins to accelerate on painting and construction projects.
“Based on our results for the first quarter and our expectations for the remainder of the year, we are affirming the full-year fiscal 2020 guidance we provided on July 22, 2019. Revenue growth is anticipated to be on the low end of our previously disclosed range of 2.5% to 4%. Despite the tightening of our revenue growth assumption, we expect to leverage the positive momentum of the 2020 MAP to Growth operating improvement plan to our bottom-line results. Therefore, we are maintaining our projected adjusted EBIT growth in the 20% to 24% range, as previously reported in July. We expect this to result in adjusted diluted EPS between $3.30 and $3.42 for fiscal 2020,” stated Sullivan.
“We continued to experience the benefits of the plant rationalization, manufacturing improvements and center-led procurement initiatives of our 2020 MAP to Growth operating improvement plan during the quarter. These actions resulted in adjusted EBIT and EPS performance that met our projections despite modest top-line sales growth,” stated RPM chairman and CEO Frank C. Sullivan. “As we anticipated in July, sales growth was modest as a result of an extremely wet June that slowed painting and construction activity in North America and unfavorable foreign exchange. We were encouraged to see our restructuring program drive significant EBIT margin improvement across all of our segments. On a consolidated basis, our adjusted EBIT margin improved 260 basis points.”
“As we communicated last quarter, we have realigned the business into four reportable segments from our previous three segments. The new segments are the Construction Products Group, Performance Coatings Group, Consumer Group and Specialty Products Group,” stated Sullivan. “The objectives of this realignment are to position the business for accelerated growth and to provide our investors with greater visibility into the business and better comparability among our peers. Starting with the current quarter of fiscal 2020, we are reporting our results under this four-segment structure and are providing comparable fiscal 2019 financials that have been recast to reflect the effect of this realignment.”
“The recent acquisitions of Nudura and Schul, as well as last year’s price increases, helped to drive sales growth in the Construction Products Group, despite unfavorable foreign exchange. Impacting our North American businesses were labor shortages and June weather conditions that delayed construction activity. Also contributing to the top line was our basement waterproofing solutions business, as well as a recovery in our Brazilian operation, which generated significant sales growth. The $16.3 million improvement in the segment’s adjusted EBIT was substantially driven by savings from our restructuring program, including management delayering, plant rationalization and improved manufacturing disciplines,” stated Sullivan.
“Savings from our 2020 MAP to Growth plan provided significant earnings leverage in the Performance Coatings Group, driven by a reduction of our operational footprint and strategic decisions to exit low-margin businesses. In addition, the segment has benefited from executing a reorganization and management delayering as it moves towards a global brand management structure,” stated Sullivan.
“The Consumer Group’s improvement in EBIT was largely due to a favorable year-over-year comparison resulting from $10 million in costs associated with legal settlements during the first quarter of fiscal 2019. Results in the first quarter were impacted by market share gains in the prior quarter, which led to higher costs from outsourcing production to service this increased demand. In light of market share gains and expectations for continuing growth, we are investing in new equipment, improving production methods and leveraging RPM’s internal manufacturing network to produce products more efficiently and create greater capacity,” stated Sullivan.
Business Outlook
“For the second quarter of fiscal 2020, we expect sales to be up 2% to 3% with strong leverage to the bottom line for an estimated 20% to 24% adjusted EBIT growth, resulting in adjusted diluted EPS in the low- to mid-70-cent range.
“Looking ahead to our fiscal 2020 third and fourth quarters, it is important to note the seasonality in our business. Historically, our third quarter provides our most modest results each year because it falls during the winter months of December through February, when painting and construction activity slow due to cold and snowy weather. Our fourth-quarter results are generally stronger as work begins to accelerate on painting and construction projects.
“Based on our results for the first quarter and our expectations for the remainder of the year, we are affirming the full-year fiscal 2020 guidance we provided on July 22, 2019. Revenue growth is anticipated to be on the low end of our previously disclosed range of 2.5% to 4%. Despite the tightening of our revenue growth assumption, we expect to leverage the positive momentum of the 2020 MAP to Growth operating improvement plan to our bottom-line results. Therefore, we are maintaining our projected adjusted EBIT growth in the 20% to 24% range, as previously reported in July. We expect this to result in adjusted diluted EPS between $3.30 and $3.42 for fiscal 2020,” stated Sullivan.
RPM International (NYSE: RPM) stock price history
The image below, obtained from Google, shows the stock price history of RPM International (NYSE: RPM) for the last 5 years. And it's been a pretty good time for RPM International stockholders. 5 years ago the stock was trading at around $45 a stock and its currently trading at $67.26 a stock. That's a healthy 49.46% returned provided by RPM International over the last 5 years. The stock of RPM International is trading at very close to its 52 week high of $70.49 and far away from its 52 week low of $51.95 which to us is a clear indication that the short term sentiment and momentum of RPM International stock is overwhelmingly positive.
Recent coverage of RPM International
The extract below shows some of the latest coverage on RPM International as obtained from Zacks
RPM International (RPM - Free Report) came out with quarterly earnings of $0.95 per share, beating the Zacks Consensus Estimate of $0.91 per share. This compares to earnings of $0.52 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 4.40%. A quarter ago, it was expected that this specialty chemicals company would post earnings of $1.14 per share when it actually produced earnings of $1.24, delivering a surprise of 8.77%. Over the last four quarters, the company has surpassed consensus EPS estimates three times.
RPM International, which belongs to the Zacks Paints and Related Products industry, posted revenues of $1.47 billion for the quarter ended August 2019, missing the Zacks Consensus Estimate by 1.27%. This compares to year-ago revenues of $1.46 billion. The company has topped consensus revenue estimates just once over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.RPM International shares have added about 14.3% since the beginning of the year versus the S&P 500's gain of 17.3%.
Read the full article here
RPM International (RPM - Free Report) came out with quarterly earnings of $0.95 per share, beating the Zacks Consensus Estimate of $0.91 per share. This compares to earnings of $0.52 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 4.40%. A quarter ago, it was expected that this specialty chemicals company would post earnings of $1.14 per share when it actually produced earnings of $1.24, delivering a surprise of 8.77%. Over the last four quarters, the company has surpassed consensus EPS estimates three times.
RPM International, which belongs to the Zacks Paints and Related Products industry, posted revenues of $1.47 billion for the quarter ended August 2019, missing the Zacks Consensus Estimate by 1.27%. This compares to year-ago revenues of $1.46 billion. The company has topped consensus revenue estimates just once over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.RPM International shares have added about 14.3% since the beginning of the year versus the S&P 500's gain of 17.3%.
Read the full article here
RPM International (NYSE: RPM) latest stock valuation
So what is RPM International stock worth based on the release of their latest earnings report ? Based on their earnings report our valuation models provide a target (full value) price for RPM International of $55.90 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $55.90. So a good entry point into RPM International stock would be at $50.31 or below. Since the stock price is well above this we would not recommend buying into RPM at its current price and we expect the stock price to pull back in coming weeks and months to levels closer to our valuation levels.
We usually suggest long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $55.90. So a good entry point into RPM International stock would be at $50.31 or below. Since the stock price is well above this we would not recommend buying into RPM at its current price and we expect the stock price to pull back in coming weeks and months to levels closer to our valuation levels.