RPM International’s adjusted earnings estimates
As of December 20, 2017, analysts expect RPM International (RPM) to report adjusted EPS (earnings per share) of $0.59 in fiscal 2Q18—an increase of approximately 13.5% YoY (year-over-year). In fiscal 2Q17, RPM International reported adjusted EPS of $0.59.
The projected EPS increase is expected to be driven by positive foreign currency translation and RPM’s SG&A (selling, general, and administrative) expenses. Analysts expect SG&A expenses of $406.0 million for RPM, which represents 32.0% of its expected sales. In 2Q17, RPM reported SG&A expenses of $419.5 million, representing 35.2% of sales and implying an improvement of 320 basis points YoY.
On the other hand, rising raw material costs could be a challenge and increase the cost of goods sold. However, RPM’s initiative to raise product prices could offset this threat. Also, RPM’s interest expense is expected to rise due to additional borrowings it made to finance acquisitions in fiscal 2017. It remains to be seen whether RPM can overcome these challenges and meet analysts’ expectations.
To improve their EPS, many companies buy outstanding common stock from the open market. Whereas RPM has a stock repurchase program, it has not been effectively used to improve EPS. In fiscal 1Q18, RPM did not buy back any of its outstanding common shares. This trend may continue for this quarter as well. At the end of fiscal 1Q18, RPM had 135.7 million outstanding common shares.
Investors can get exposure to RPM International stock through the PowerShares S&P MidCap Low Volatility Portfolio ETF (XMLV), which has invested 1.1% of its portfolio in RPM International. XMLV’s other holdings include Brown & Brown (BRO), Westar Energy (WR), and SEI Investments (SEIC), which had weights of 1.5%, 1.6%, and 1.4%, respectively, as of December 20, 2017. In the next part, we’ll look at analysts’ recommendations ahead of RPM’s fiscal 2Q18 earnings announcement.