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RPM International (RPM) to Post High Q1 Earnings on Solid Pricing

RPM International Inc. RPM is slated to report first-quarter fiscal 2023 results (ended Aug 31) on Oct 5, before the opening bell.

In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate by 1.4%, but net sales marginally topped the same. On a year-over-year basis, earnings and net sales increased 10.9% and 13.7%, respectively.

The Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been unchanged at $1.33 per share over the past 60 days. The estimated value indicates a 23.2% increase from the year-ago earnings of $1.08 per share. The consensus mark for revenues is $1.89 billion, suggesting a 14.5% year-over-year improvement.

RPM International Inc. Price and EPS Surprise

RPM International Inc. price-eps-surprise | RPM International Inc. Quote


Factors to Consider

RPM’s fiscal first-quarter earnings and revenues are likely to have increased from the prior year’s levels on prudent cost management and solid pricing. Also, improvement in the construction and industrial maintenance activity, a rebound in energy markets and its focus on investments in the fastest-growing areas of its business are likely to have added to the positives.

RPM International expects net sales to increase in the mid-teens. It also expects sales growth in the mid-teens across the operating segments. Particularly, the Consumer Group is likely to generate the highest growth of the four segments backed by selling price increases, improved alkyd resin supply and investments in operations.

The Zacks Consensus Estimate for Construction Products Group or CPG net sales of $688 million suggests a 6.8% increase from a year ago. The same for Performance Coatings Group or PCG sales are likely to rise 6.8% to $305 million from the previous year’s levels.

The consensus estimate for Consumer Group or CG net sales of $579 million suggests a 7.5% increase from a year ago. The same for Specialty Products Group or SPG sales are likely to increase 5.4% to $192 million from a year ago.

RPM intends to increase prices for certain raw materials, labor and packaging to forgo unprecedented supply-chain and inflationary woes. Higher costs from unreliable bulk transportation (which creates production inefficiencies) and fuel surcharges (driven by high energy prices) are expected to have affected the CG segment. Also, it anticipates a strengthening U.S. dollar to remain a headwind for the fiscal first quarter.

RPM anticipates the fiscal first quarter’s adjusted EBIT to increase 20-25% versus a fall of 23.2% reported in first-quarter fiscal 2022.

The consensus mark for CPG’s adjusted EBIT is likely to increase 4.9% year over year. The same for PCG’s adjusted EBIT is likely to improve 8.9% from the prior year’s levels. The consensus estimate for CG’s adjusted EBIT is likely to rise 30.1% and that of SPG is likely to increase 21% from the prior year’s tally.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for RPM International this time around. That is because 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. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Its earnings ESP is -1.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With 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 their respective quarters to be reported.

Primoris Services Corporation PRIM has an Earnings ESP of +13.85% and a Zacks Rank #2.

PRIM’s earnings topped the consensus mark in two of the last four quarters and missed the other two occasions, with the average being negative 19.6%. Earnings for the to-be-reported quarter are expected to grow 10.1% year over year.

Dycom Industries, Inc. DY has an Earnings ESP of +2.34% and a Zacks Rank #1.

DY’s earnings topped the consensus mark in all of the trailing four quarters, with the average surprise being 140%. Earnings for the to-be-reported quarter are expected to grow 34.7% year over year.

Boise Cascade Company BCC has an Earnings ESP of +3.29% and a Zacks Rank #2.

BCC’s earnings topped the consensus mark in all the last four quarters, with the average being 27.1%. Earnings for the to-be-reported quarter are expected to grow 92.6% year over year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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