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RPM International Earnings: Meeting Low Expectations

By Demitri Kalogeropoulos – Oct 12, 2021 at 11:15AM

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The sealants and coatings giant is still on track to grow sales in 2021.

In this video from "Beat & Raise" on Motley Fool Live recorded on Oct. 6, Fool.com contributor Demitri Kalogeropoulos shares the biggest takeaways from RPM International's (RPM 0.59%) latest earnings report.

Growth slowed and earnings took a significant hit in the most recent quarter, he explains, but that was no surprise for investors following along with management's updates. 

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Demitri Kalogeropoulos: So, RPM International, they reported earnings this morning, but the headline takeaway for me is basically getting through a tough time. That's what the company is doing right now. This is a global company. They sell sealants and coatings and paints and glues and stuff like that. They're organized into four major segments here.

A lot of this is going to sound familiar to people that follow Sherwin-Williams, which is what this makes me think of a little bit.

They've got a different business model, but some similarities here. Their construction products group is one of the bigger ones. It's around on that 40% between somewhere around a third of sales.

The big one is concrete basically in products that you use in construction for buildings. Very popular list of brands there. Then just to the right of that, you can see this performance coating; similar, but this is high intensity coatings for things like you see pictures there, like oil tanks and bridges.

Something that's going to have to go through a whole lot of weathering. You might say that's somewhere in that 33% of sales market there too.

Then consumer group, we're going to talk a lot about today because that's the one that was really underperforming in the last quarter and that's the one that includes things like paints and superglues and sprays and coatings for consumer products like tires and things around the house.

There are some brands that you might recognize on there like Rust-Oleum. Then specialty products is a smaller part of their business, somewhere around 11%.

Let's take a quick look at the earnings. As you can see basically like I said they didn't surprise on any of these. Their bottom and topline essentially track with what management was predicting about three months ago.

Revenue was $1.65 billion, up three percent. That's basically exactly what Wall Street was expecting the management had forecast somewhere in the low single digits and three percent counts for that.

Their earnings were a $1.04 down 25 percent. That's not really because of any unusual situation. This is basically organic operating earnings. That was a big drop and I'll talk about why that isn't just a second. But as I said, that's exactly what people were expecting.

You can see a little bit maybe in the stock chart there that Wall Street has been lowering their expectations for this business a bit lately because management has been pretty clear about the profit headwinds that they were experiencing and those definitely hit this quarter.

Demitri Kalogeropoulos owns shares of Sherwin-Williams. The Motley Fool recommends RPM International and Sherwin-Williams. The Motley Fool has a disclosure policy.

Stocks Mentioned

RPM International Stock Quote
RPM International
RPM
$104.23 (0.59%) $0.61
Sherwin-Williams Stock Quote
Sherwin-Williams
SHW
$251.61 (0.97%) $2.43

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