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Behind RPM International's Fiscal 1Q18 Expectations

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Behind RPM International's Fiscal 1Q18 Expectations PART 2 OF 5

Behind RPM International’s Earnings Expectations for Fiscal 1Q18

RPM International’s adjusted EPS estimates

As of September 25, 2017, analysts expect RPM International (RPM) to report adjusted EPS (earnings per share) of $0.84 in its fiscal 1Q18—a 1.2% rise on a YoY (year-over-year) basis. In fiscal 1Q17, RPM International reported adjusted EPS of $0.83.

Behind RPM International&#8217;s Earnings Expectations for Fiscal 1Q18

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RPM’s expected adjusted EPS would primarily be driven by the better management of operating expenses. Analysts are expecting RPM’s SG&A (selling, general, and administrative) expenses to be at $402.0 million, representing 30.4% of expected sales. In fiscal 1Q17, its SG&A expenses totaled $384.1 million, representing 30.7% of revenues and implying an improvement of 30 basis points YoY.

But any rise in raw material prices could increase RPM’s cost of goods sold, which could impact RPM’s EPS adversely. RPM has guided that a favorable tax adjustment that helped it improve its EPS last year will not be present this year.

Stock repurchases

Companies can improve their EPS through share repurchases, which reduces the number of outstanding shares. RPM in fiscal 4Q17 bought back 34,289 shares, but it remains to be seen how much it will help increase its EPS. At the end of fiscal 1Q16, RPM had ~135.2 million outstanding shares. Analysts have projected that RPM’s outstanding shares for fiscal 1Q18 will reach 134.6 million shares.

Investors can hold RPM International stock by investing in the iShares US Basic Materials ETF (IYM), which has invested 1.0% of its portfolio in RPM International. IYM’s other holdings include DowDuPont (DWDP), Monsanto (MON), and Praxair (PX), which had weights of 24.8%, 7.8%, and 6.0%, respectively, on September 25, 2017.

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