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RPM International Earnings: An Early Look

By Dan Caplinger - Apr 2, 2013 at 10:11AM

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Can the maker of sealants and coatings profit from the new boom in housing?

The new earnings season is about to begin, but a few companies on off-quarter fiscal years are just now getting around to reporting their quarterly results. RPM International (RPM -0.81%) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Companies that stand to benefit from a rising housing market have been increasingly popular lately, and RPM's extensive lineup of waterproofing and weatherproofing products for everything from driveways and wood decks to roofing sealants and caulk definitely qualifies it as a play on home ownership. Let's take an early look at what's been happening with RPM International over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on RPM International

Analyst EPS Estimate

$0.06

Change From Year-Ago EPS

20%

Revenue Estimate

$841.4 million

Change From Year-Ago Revenue

8.8%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will RPM International be loss-proof this quarter?
Analysts have gotten a little less optimistic about RPM's prospects in recent months, as they've reduced their earnings-per-share calls by a penny for the most recent quarter and by $0.03 for the full 2013 fiscal year. The stock has posted a modest advance of about 6% so far this year, but that's well below the overall market's performance, let alone that of some high-flying housing-related stocks.

RPM has benefited greatly from better prospects in the housing industry. As results from the homebuilding sector have gotten stronger, demand for RPM's sealants and coatings has followed suit, sending share price higher. In addition to providing consumer products like Rust-O-Leum and DAP, the company also provides a wide variety of materials for industrial companies and commercial builders. The industrial segment makes up two-thirds of RPM's overall business.

But RPM has plenty of competition to deal with. Both Sherwin-Williams (SHW -1.99%) and PPG Industries (PPG -1.11%) dwarf RPM in size, although both of those companies are much more focused on the paint sector, which has its own specific industry dynamics. Nevertheless, just as PPG and Sherwin-Williams have had to deal with the ups and downs of the titanium dioxide market -- a key pigment for paint production -- RPM also mentions it as a key driver of its raw-materials costs, in addition to certain resins and solvents related to other products.

In its quarterly report, watch for RPM to discuss why its revenue growth has lagged behind that of PPG and Sherwin-Williams over the past year. Without a satisfactory explanation, it'll be hard to justify paying 25 times trailing earnings for the stock, even with a long record of dividend growth behind it.

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Stocks Mentioned

RPM International Inc. Stock Quote
RPM International Inc.
RPM
$83.95 (-0.81%) $0.69
The Sherwin-Williams Company Stock Quote
The Sherwin-Williams Company
SHW
$254.22 (-1.99%) $-5.15
PPG Industries, Inc. Stock Quote
PPG Industries, Inc.
PPG
$121.31 (-1.11%) $-1.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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