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Why Analysts Expect RPM International’s Adjusted EPS to Fall

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RPM International’s adjusted EPS estimates

As of March 31, 2017, Wall Street analysts are expecting RPM International’s (RPM) adjusted earnings per share (or EPS) to be at $0.11 in fiscal 3Q17, a decline of 21.4% over fiscal 3Q16.

The expected decline in RPM’s adjusted earnings per share would mainly be driven by an increase in the cost of goods sold, specifically due to an increase in the prices of titanium dioxide. Titanium dioxide is a major raw material in paint manufacturing. Plus, pension expenses and expenses from the recent acquisition could dent RPM’s earnings per share in 3Q17.

On the other hand, analysts expect RPM’s selling, general, and administrative expenses (or SG&A) to come down. Analysts expect SG&A expenses to be at 36.9% of the sales in 3Q17 as compared to 37.5% of the sales in 3Q16, a decrease of 60 basis points.

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Management earnings guidance for full year

RPM management expects fiscal 2017 full year adjusted earnings to be in the range of $2.62 to $2.72. This estimate excludes the charges of $0.94 related to the Kirker impairment, $0.09 per share related to the Flowcrete Middle East charge, and $0.05 related to restructuring in Europe.

Will RPM boost its EPS through share repurchases?

To improve EPS, companies often reduce the number of outstanding shares through share repurchase programs. In Fiscal 2Q17, RPM International bought back 52,205 shares valued at $2.6 million. The RPM share repurchase program was authorized in January 2008, and there is no time or amount limit set under this program. RPM intends to purchase one million to two million shares every year under this program. It remains to be seen how many shares RPM will buy back during fiscal 3Q17 to boost its EPS.

Investors can hold RPM International indirectly by investing in the iShares U.S. Basic Materials (IYM), which has a weight of 1.2%. The top holdings of the fund include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON), which have weights of 11.8%, 11.6%, and 8.2%, respectively, as of March 31, 2017. In the next part, we’ll look into analysts’ latest recommendations for RPM International.

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