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How RPM International Fared in Fiscal 1Q18

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How RPM International Fared in Fiscal 1Q18 PART 1 OF 6

RPM Stock Fell despite Better-than-Expected 1Q18 Earnings

RPM 1Q18 earnings

RPM International (RPM) announced its fiscal 1Q18 earnings on October 4, 2017, before the market opened. RPM reported diluted earnings per share of $0.86 as compared to $0.83 in the previous year, implying growth of 3.6% on a year-over-year basis. RPM beat the analysts’ estimate of $0.84.

RPM Stock Fell despite Better-than-Expected 1Q18 Earnings

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RPM’s earnings per share rose primarily due to higher revenue driven by the nine acquisitions it made in fiscal 2017. Further, RPM’s selling, general, and administrative (or SG&A) expenses improved as a percentage of sales. In fiscal 1Q18, RPM reported SG&A expenses of $394.4 million, representing 29.3% of the sales. In fiscal 1Q17, SG&A expenses were $384.08 million, representing approximately 30.7% of the sales, an improvement of 140 basis points on a year-over-year basis. However, the increase in raw material prices is cause for concern. As a result, the gross profit margin was adversely impacted. RPM believes that product price hikes will negate the increase in raw materials prices. The other important positive factor is that the impact from foreign currency remained neutral this quarter due to the recent weakness in the dollar.

Stock price and guidance

Surprisingly, RPM International stock fell 2.6% and closed at $51.54. Sherwin-Willimas (SHW) fell 0.05%, while PPG Industries (PPG) and Axalta (AXTA) rose 0.24% and 0.14%, respectively, on the same day. RPM maintained the fiscal 2018 diluted earnings per share guidance to be in the range of $2.85 to $2.95. In this series, we’ll analyze RPM’s earnings, revenues, its segment performance in fiscal 1Q18, and its outlook.

Investors can indirectly hold RPM by investing in the ProShares S&P MidCap 400 Dividend Aristocrats (REGL), which has invested 2.3% of its holdings in RPM as of October 4, 2017.

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