Nevertheless, there are things for which RPM deserves a watchful eye. Read on to know what I am talking about.
Good to see revenue growing
Higher volumes and prices drove RPM's revenues to $916.1 million, up a good 10.9% from last year. Organic sales in the company's industrial segment (which accounts for nearly 70% of RPM's total sales) and its consumer segment grew 5.9% and 12.5%, respectively. These figures are impressive as they do not include contributions from the various acquisitions the company has been aggressively making in the last few months.
Unfortunately, high input costs ate into RPM's revenues, denting its bottom-line growth. Its profits managed to crawl up by just 2.3% from the year-ago quarter to $49.9 million. RPM's price hikes were sadly not enough to beat the pace of cost escalation.
The imposing challenge
High input costs have been a pain for RPM for some time now. The entire coating and paints industry has, in fact, been hit hard by the persistent passing-the-buck strategy of raw material producers, forcing companies like RPM to raise the prices of their products.
Paint retailer Sherwin-Williams'
But there's a common concern that's worrying all the three companies -- the time lag between the rise in input costs and the implementation of price hikes.
Sadly, producers of key raw materials such as titanium dioxide aren't showing interest in getting off the price-hike bus so soon. Take DuPont
What's RPM's tactic to tackle the challenge? Further price hikes; what else can it do? Now, this should blend well with the expected accretion of sales from its newly acquired companies and help RPM combat the high-cost pressure.
An eye on growth
Just like the first quarter, RPM's second quarter was also dotted with acquisitions. It acquired a fire protection firm as well as an equipment and solutions provider during the period. A few days back, RPM bought an insulating and finish systems provider, targeting markets in Germany and France.
RPM also raised its stake in Indian chemical company Kemrock to 23% in September, which is an excellent opportunity to increase presence in the fast-growing Indian market. Needless to say, RPM continues to impress with its growth moves.
The Foolish bottom line
What I like about RPM is its growing top line and acquisitive use of cash. But you might find the company's handsome dividend yield of 3.4% even more attractive.
RPM might be expecting a lukewarm third quarter owing to seasonality, but in the longer run, there are enough reasons to maintain an optimistic view of the stock. To make sure you stay updated on RPM's news and analysis, click here to add it to your watchlist, our free and personalized stock-tracking service for you.
I think RPM is a good pick for the future, but our analysts have selected a different stock that they believe is poised for tremendous growth in 2012. Find out which company in our new free report: "The Motley Fool's Top Stock for 2012." Thousands have already requested access and it'll only be available for a limited time. Simply click here -- it's free.
Fool contributor Neha Chamaria does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Sherwin-Williams. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
RPM International Inc. (RPM) Q2 2018 Earnings Conference Call Transcript
RPM earnings call for the period ending November 30, 2017.
RPM International Posts Strong Sales, Record Profits
Find out how the coatings and sealants specialist keeps on doing well.
These 3 Stocks Just Raised Their Dividends
The top satellite-radio company, a successful regional bank, and a Dividend Aristocrat in the industrials sector all lifted their distributions last week.