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RPM International (RPM) to Post Q1 Earnings: What's in Store?

RPM International's (RPM) fiscal Q1 results are likely to reflect higher costs and expenses despite benefits from the MAP to Growth initiative along w...

This story originally appeared on Zacks

RPM International Inc. RPM is scheduled to report first-quarter fiscal 2022 results (ended Aug 31) on Oct 6, before the opening bell.

In the last reported quarter, the company’s earnings and sales topped the Zacks Consensus Estimate by 1.6% and 3.5%, and grew 13.3% and 19.6% on a year-over-year basis, respectively. The upside was driven by the 2020 MAP to Growth initiative, strong pricing and a strategically balanced business model.

- Zacks

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has trended downward to $1.00 from $1.05 per share over the past 30 days. The estimated value indicates a 30.6% decrease from the year-ago earnings of $1.44 per share. The consensus mark for revenues is $1.66 billion, suggesting a 3.3% year-over-year improvement.

RPM International Inc. Price and EPS Surprise

RPM International Inc. Price and EPS Surprise

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

Factors to Consider

Resilient housing and home improvement markets are expected to have aided revenues in the fiscal first quarter. Accretive buyouts and excellent momentum in the MAP to Growth program also added to the positives.

For the quarter to be reported, RPM International — which focuses on building restoration, renovation and innovation — anticipates low- to mid-single-digit growth from first-quarter fiscal 2021. It anticipates Construction Products Group and Performance Coatings Group to witness sales growth in high-single or low-double digits. Sales in the Specialty Products Group are expected to generate double-digit growth. The company, however, expects Consumer Group sales to decline in double digits. Nevertheless, the Consumer Group’s first-quarter fiscal 2022 sales are anticipated to grow beyond the pre-pandemic level.

Meanwhile, RPM International has been focusing on cost-containment efforts by closing plants, merging IT systems, centralizing more of its back-office functions and rationalizing manufacturing footprint. Yet, certain raw materials, packaging-related inflation and additional overhead expenses resulting from the ongoing investments in capacity are anticipated to have put pressure on the bottom line.

Importantly, rapidly escalating material costs and insufficient supply of raw materials are compressing margins. Raw material inflation is expected to have impacted its bottom-line performance. Also, costs of all types of transportation such as rail, over-the-road, truck and ocean freight are headwinds.

The company expects adjusted EBIT for first-quarter fiscal 2022 to grow for business segments, barring Consumer Group. Consolidated adjusted EBIT is expected to decrease 25-30% from the year-ago adjusted EBIT of nearly 40%.

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 -6.00%. 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 #4 (Sell).

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 that have the right combination of elements to post an earnings beat in their respective quarters to be reported.

ChampionX Corporation CHX has an Earnings ESP of +0.58% and a Zacks Rank #3.

Aspen Aerogels, Inc. ASPN has an Earnings ESP of +2.60% and holds a Zacks Rank #3.

Williams-Sonoma, Inc. WSM has an Earnings ESP of +2.24% and holds a Zacks Rank #1.

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