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Category: Stock Market and RPM International
Date: 12 April 2020 Stock Price: $65.81 We take a look at the 3rd 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 3rd quarter 2020 earnings report
- Net sales: $1.173 billion (up from $1.140 billion for the same quarter of the previous year
- Net sales increased by 2.9% over the last 12 months
- Cost of sales: $739.229 million (up from $731.208 million for the same quarter of the previous year)
- Cost of sales increased by 1.1% over the last 12 months
- Some margin gains for RPM as their sales grow at a rate faster than their cost of sales
- Net income: $11.853 million (up from $14.19 million for the same quarter of the previous year)
- Diluted earnings per share: $0.09 (up from $0.11 for the same quarter of the previous year)
- PE ratio of RPM International: 32.9
- Diluted weighted-average shares outstanding: 130.028 million (down from 131.889 million for the same quarter of the previous year)
- Cash and cash equivalents: $212.242 million
- Cash and cash equivalents per share: $1.63
- Cash and cash equivalents makes up 2.48% of RPM's market capital
- Cash and cash equivalents makes up 3.79% of RPM's total assets
- Accounts receivable: $1.006 billion
- Accounts receivable makes up 18.1% of RPM's total assets
- Inventories: $914.197 million
- Inventories makes up 16.4% of RPM's total assets
- Stockholders equity of RPM: $1.353 billion
- Stockholders equity per share for RPM : $10.41
- So RPM is trading at 6.32 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.
- The S&P 500 has a price to book value of 3.34 times. Read more about the S&P500 here
RPM International's management commentary on their 3rd quarter 2020 earnings guidance
MEDINA, OH – April 8, 2020 – RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today reported financial results for its fiscal 2020 third quarter ended February 29, 2020.
“Our financial performance was strong during the third quarter and was achieved prior to the global COVID-19 pandemic, when underlying market conditions were robust. We are doing our part to control the spread of the virus, with our priorities being to protect the health and well-being of our associates and their family members, support our local communities to control the spread of the virus, and serve our customers by maintaining the continuity and success of our business operations,” stated RPM chairman and CEO Frank C. Sullivan. “We are taking actions to adjust our business activities during this period of uncertainty and are well-positioned with a strong balance sheet and $1.14 billion in liquidity.”
“Our financial performance was strong during the third quarter and was achieved prior to the global COVID-19 pandemic, when underlying market conditions were robust. We are doing our part to control the spread of the virus, with our priorities being to protect the health and well-being of our associates and their family members, support our local communities to control the spread of the virus, and serve our customers by maintaining the continuity and success of our business operations,” stated RPM chairman and CEO Frank C. Sullivan. “We are taking actions to adjust our business activities during this period of uncertainty and are well-positioned with a strong balance sheet and $1.14 billion in liquidity.”
Business Outlook
“The fourth quarter is seasonally our strongest and was off to a good start in March, with consolidated sales up approximately 5% over the prior year. Many of our products are used for construction, maintenance and repair projects, which are deemed essential in many cases and are relatively recession resistant. A large number of our North American customers, such as those in construction and DIY home and hardware retail, are also considered essential and currently remain open for business. With people spending more time in their homes, there is potential for increased activity in DIY projects. Demand is strong for our professional and consumer cleaning and disinfectant brands, some of which are effective against Coronavirus. Raw material cost inflation seems to be moderating in a number of our key product categories.
Our global supply chain remains strong, and our distribution and operations associates continue to work diligently to meet customer demand,” stated Sullivan. “However, like most companies, we expect our financial results to be impacted by the disruption and uncertainty COVID-19 is having on the global economy. As we cannot predict the duration or scope of the pandemic, the financial impact to our results cannot be reasonably estimated, but could be material. “COVID-19 is also disrupting our ability to implement new initiatives under our restructuring program.
While there are some activities that can be carried out virtually, many require a physical presence that is being hindered by limits on travel and access to facilities. Because of this, we will be extending the timeline for achieving our MAP to Growth goals. As markets stabilize and we gain more clarity into business conditions, we will communicate our new MAP to Growth timeline. “According to current government projections, it appears that the crisis will reach its peak in April or May. This is a fluid situation, and the information available to us is rapidly changing. As of today, we anticipate that our consolidated fourth-quarter revenue will be down 10% to 15% year over year. This assumes that our strong March results are counterbalanced by sales drops in April and May of 15% to 20%. Given the uncertainties around this crisis, we are withdrawing our prior earnings guidance for the fourth quarter and full year of fiscal 2020,” stated Sullivan.
“We continue to assess the situation and the long-term impact of COVID-19. In this environment, we are taking aggressive actions to manage cash flow by reducing working capital, capital expenditures and discretionary spending. The MAP to Growth program timing has been fortunate for us in this regard since we have improved margins and are starting to see the benefits of our working capital reduction program, resulting in improved cash flow this year. Additionally, we have significant liquidity and
“The fourth quarter is seasonally our strongest and was off to a good start in March, with consolidated sales up approximately 5% over the prior year. Many of our products are used for construction, maintenance and repair projects, which are deemed essential in many cases and are relatively recession resistant. A large number of our North American customers, such as those in construction and DIY home and hardware retail, are also considered essential and currently remain open for business. With people spending more time in their homes, there is potential for increased activity in DIY projects. Demand is strong for our professional and consumer cleaning and disinfectant brands, some of which are effective against Coronavirus. Raw material cost inflation seems to be moderating in a number of our key product categories.
Our global supply chain remains strong, and our distribution and operations associates continue to work diligently to meet customer demand,” stated Sullivan. “However, like most companies, we expect our financial results to be impacted by the disruption and uncertainty COVID-19 is having on the global economy. As we cannot predict the duration or scope of the pandemic, the financial impact to our results cannot be reasonably estimated, but could be material. “COVID-19 is also disrupting our ability to implement new initiatives under our restructuring program.
While there are some activities that can be carried out virtually, many require a physical presence that is being hindered by limits on travel and access to facilities. Because of this, we will be extending the timeline for achieving our MAP to Growth goals. As markets stabilize and we gain more clarity into business conditions, we will communicate our new MAP to Growth timeline. “According to current government projections, it appears that the crisis will reach its peak in April or May. This is a fluid situation, and the information available to us is rapidly changing. As of today, we anticipate that our consolidated fourth-quarter revenue will be down 10% to 15% year over year. This assumes that our strong March results are counterbalanced by sales drops in April and May of 15% to 20%. Given the uncertainties around this crisis, we are withdrawing our prior earnings guidance for the fourth quarter and full year of fiscal 2020,” stated Sullivan.
“We continue to assess the situation and the long-term impact of COVID-19. In this environment, we are taking aggressive actions to manage cash flow by reducing working capital, capital expenditures and discretionary spending. The MAP to Growth program timing has been fortunate for us in this regard since we have improved margins and are starting to see the benefits of our working capital reduction program, resulting in improved cash flow this year. Additionally, we have significant liquidity and
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 Inc. (NYSE:RPM) shares crept up in price on the release of quarterly figures. The Medina, Ohio, company, a world leader in specialty coatings, sealants and building materials, today reported third-quarter net income of $11.9 million; adjusted EBIT of $60.5 million, increases 30.4% over prior-year quarter. Third-quarter reported diluted EPS of $0.09; adjusted diluted EPS of $0.23, increases 76.9% over prior-year quarter and exceeds guidance.
Fiscal 2020 third-quarter net sales were $1.17 billion, an increase of 2.9% over the $1.14 billion reported a year ago. Cash provided by operating activities increases $236 million year-over-year due to improved working capital management and operating improvement initiatives
Financial guidance and stock buyback suspended due to uncertainty created by COVID-19
Said CEO Frank Sullivan, "Our financial performance was strong during the third quarter and was achieved prior to the global COVID-19 pandemic, when underlying market conditions were robust. "We are doing our part to control the spread of the virus, with our priorities being to protect the health and well-being of our associates and their family members, support our local communities to control the spread of the virus, and serve our customers by maintaining the continuity and success of our business operations,” "We are taking actions to adjust our business activities during this period of uncertainty and are well-positioned with a strong balance sheet and $1.14 billion in liquidity."
Read the full article here
RPM International Inc. (NYSE:RPM) shares crept up in price on the release of quarterly figures. The Medina, Ohio, company, a world leader in specialty coatings, sealants and building materials, today reported third-quarter net income of $11.9 million; adjusted EBIT of $60.5 million, increases 30.4% over prior-year quarter. Third-quarter reported diluted EPS of $0.09; adjusted diluted EPS of $0.23, increases 76.9% over prior-year quarter and exceeds guidance.
Fiscal 2020 third-quarter net sales were $1.17 billion, an increase of 2.9% over the $1.14 billion reported a year ago. Cash provided by operating activities increases $236 million year-over-year due to improved working capital management and operating improvement initiatives
Financial guidance and stock buyback suspended due to uncertainty created by COVID-19
Said CEO Frank Sullivan, "Our financial performance was strong during the third quarter and was achieved prior to the global COVID-19 pandemic, when underlying market conditions were robust. "We are doing our part to control the spread of the virus, with our priorities being to protect the health and well-being of our associates and their family members, support our local communities to control the spread of the virus, and serve our customers by maintaining the continuity and success of our business operations,” "We are taking actions to adjust our business activities during this period of uncertainty and are well-positioned with a strong balance sheet and $1.14 billion in liquidity."
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 3rd quarter 2020 earnings report ? Based on their earnings report our valuation models provide a target price (full value price) for RPM International of $51.20 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 $46.10 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 $46.10 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.