RPM International Inc. (NYSE: RPM) has confirmed that it will release its fiscal Q2 2022 earnings results for the quarter ending November 30, 2021, on January 5, 2022, before markets open.
What to look for
The company has a well-balanced portfolio of products, end-market and geographic diversity, and it is in a better liquid position. However, the company and other coatings producers are experiencing considerable raw material, transportation, and packaging cost increases and supply chain bottleneck. As a result, in the first quarter of 2022, ending August 31, it saw its gross margins drop 350 bps. In addition, the company expects considerably lower EBITDA margins for FY 2022 and 2023 if supply chain challenges and cost inflation continue to accelerate.
Earnings: Stockearning’s Estimated EPS is expected to be better than the $1.08 reported in Q1 2022. The company produced an 8% adjusted diluted EPS surprise but was down 25% YoY. Historical EPS Performance for the past 12 quarters indicates that the company has beat estimates eleven times (91%) and missed only once (8%).
Revenue: The company reported sales of $1.65 billion in Q1 2022, representing a 2.7% YoY. Consolidated adjusted EBIT dropped 23.2% to $206.8 million because of supply chain uncertainties, inflation, and the difficulty of the Consumer Group’s comparison to last year’s results.
Stock movement: RPM shares have gained 20.4% since the company released its last quarter earnings. Interestingly, RPM International shares have been DOWN 24 times in the past 46 quarters. So, the historical price reaction suggests a 52% probability of the share price going DOWN once RPM reports its fiscal Q2 2022 earnings. According to the Stockearning algorithm, the predicted first-day move is 2%, while the predicted move on the seventh day is 3%.
What analysts are saying
Vertical research analyst Kevin McCarthy downgraded the stock from Buy to Hold with a price target of $96. In a research note, the analyst told investors that although the company is on the path to recovery through the rest of FY2022 through FY2023, the "trajectory is debatable," considering the inherent supply chain uncertainty and current cost inflation the present projections might be elevated. The analyst added that comparisons are becoming more challenging and noted that his EPS projections for the stock are slightly below consensus.
Also, RBC Capital analyst Arun Viswanathan lowered his price target on the stock from $89 to $87 and maintained an Industry Perform rating on the stock. The analyst cited the impact of the supply chain disruptions and raw material inflation, resulting in him lowering FY21 EPS forecasts by 7 cents and FY22 outlook by 6 cents to $3.96 and 4.69, respectively. Interestingly Viswanathan added that he would be more constructive on RPM provided demand remains resilient after the supply chain headwinds wan bring EBITDA margins to almost 15% to 16%.
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