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Why Analysts Expect RPM’s Revenue to Rise despite Tough Conditions

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Analysts’ revenue estimates

Analysts are expecting RPM International (RPM) to post revenues of $1.0 billion in fiscal 3Q17, an increase of 5.2% over the corresponding quarter last year. In fiscal 3Q16, RPM posted revenues of $988.6 million. RPM’s third quarter has typically been sluggish.

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What could drive RPM’s revenue higher?

In the prevailing tough economic environment, the bright spots in home sales are expected to improve RPM’s revenue. The new home sales between December 2016 and February 2017 were 1.7 million units, a growth of 8.6% over the corresponding quarter last year. Existing home sales have also been encouraging with a growth of 3.4% year-over-year. Plus, RPM International could also benefit from the prevailing dollar weakness after substantial gains. The dollar index, which is a measure against a basket of currencies, fell from 101.5 points to 101.1 points.

RPM’s revenue could also rise due to its acquisition of Holton Food Products Company, which it acquired in February 2016. Holton had net sales of $7 million per year.

Investors can hold RPM International by investing in the First Trust Materials AlphaDEX Fund ETF (FXZ), which invests 1.9% of its portfolio in RPM. The top holdings of the fund include Owens Corning (OC), Dow Chemical (DOW), and Eastman Chemical (EMN), which have weights of 3.8%, 3.6%, and 3.4%, respectively, as of March 31, 2017.

In the next part, we’ll look into analysts’ earnings expectations for RPM International.

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