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Will RPM International Beat Revenue Expectations?

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Analysts’ revenue expectations

RPM International’s (RPM) fiscal 4Q17 revenues could be the highest quarterly revenues ever. As of July 10, 2017, analysts expect RPM International to post revenues of $1.5 billion—an increase of 5.10% compared to the same quarter last year. In 4Q16, RPM International posted revenues of $1.43 billion. Generally, RPM records the highest revenue in the fourth quarter.

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What could drive revenues?

In the first nine months of fiscal 2017, RPM International has acquired nine companies. The last acquisition was in January when it acquired Prime Resins. Since then, RPM International hasn’t announced any acquisitions. The combined annual revenues of these acquired companies are estimated to be ~$220 million. As a result, revenues from the acquisitions will be a key component in RPM International’s 4Q17 expected revenue growth.

Continued growth in the construction space in the US is expected to drive RPM International’s organic growth. US data on construction activities indicate 5% growth between March and May 2017—compared to the same period the previous year. Weakness in the dollar against the basket of currencies could also increase RPM International’s revenues. The US Dollar Index fell from 101.12 on March 1, 2017, to 97.28 by the end of May—a decline of 3.8% in the span of three months. However, RPM International’s hedge policy will determine whether it will be beneficial or not.

Investors can indirectly hold RPM International by investing in the iShares U.S. Basic Materials ETF (IYM), which has invested 1.2% of its portfolio in RPM International. The fund’s top holdings include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) with weights of 11.20%, 11.10%, and 8.10%, respectively, as of July 10, 2017.

In the next part, we’ll look at analysts’ earnings expectations for RPM International in fiscal 4Q17.

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