A month has gone by since the last earnings report for RPM International (RPM Quick QuoteRPM - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is RPM International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

RPM International Q1 Earnings Beat Estimates, Margin Rises Y/Y

RPM International reported impressive earnings in first-quarter fiscal 2025 (ended Aug. 31, 2024).

It reported strong earnings on the back of record adjusted EBIT for the 11th consecutive quarter and reduced interest expenses. The bottom line improved on continued implementation of MAP 2025 operational improvement initiatives and leveraging its portfolio of products, services and entrepreneurial culture to capture growth opportunities.

However, net sales missed the Zacks Consensus Estimate and declined from the previous year.

For the second quarter, RPM expects continued growth in high-performance building construction and renovation but softness in residential end markets.

Inside the Headlines

RPM’s adjusted earnings per share (EPS) of $1.84 beat the Zacks Consensus Estimate of $1.76 by 4.6% and increased 12.2% from the year-ago period. The upside was driven by reduced interest expenses from debt paydowns of $453.1 million in the last 12 months.

Net sales of $1.97 billion missed the consensus mark of $2.02 billion by 2.4% and fell 2.1% from the prior year’s $2.01 billion. Positive volume growth at the CPG and PCG segments, and slightly favorable pricing were more than offset by unfavorable foreign exchange and volume declines at Consumer Group and SPG units. Businesses aligned with new high-performance building projects and renovations performed better than the businesses associated with residential end markets.

Geographically, sales declined 1.4% in North America (accounting for around 80% of total sales). Europe (13% of total sales) declined 5.2% due to a soft economic environment, foreign currency translation headwinds and divestitures. Latin America (4% of total sales) was down 10.4% year over year due to foreign currency headwinds. Nonetheless, Asia / Pacific (2% of total sales) and Africa / Middle East (1% of total sales) grew 1.2% and 6.6%, respectively, aided by spending on infrastructure and high-performance building projects.

Net sales fell 0.9% organically. Divestitures, net of acquisitions, reduced sales by 0.1% and foreign currency translation impacted sales by 1.1%.

Operational Discussion

Selling, general and administrative expenses, as a percentage of net sales, grew to 26.7% from 26.4% reported a year ago.

Adjusted EBIT increased 6.3% year over year to $328.3 million. Adjusted EBIT margin improved 130 basis points (bps) year over year to 16.7%. The upside was driven by MAP 2025 and improved fixed-cost leverage at businesses with volume growth.

Segmental Details

Construction Products Group or CPG: In the reported quarter, segment sales increased 1.4% from a year ago to $794 million, owing to 2.2% organic growth and 0.4% contribution from buyouts. Foreign currency translation reduced sales by 1.2%. CPG attained strong sales on the back of turnkey roofing systems and wall systems serving both new high-performance construction projects and renovations.

Adjusted EBIT of $159.9 million was up 10.6% year over year and adjusted EBIT margin rose 160 bps to 20.1%. This was driven by improved fixed-cost leverage from volume growth, MAP 2025 benefits and a focus on selling higher-margin products and services.

Performance Coatings Group or PCG: The segment’s sales decreased 1.8% year over year to $371.8 million. Sales were up 1.8% organically but declined 2% due to divestitures and 1.6% owing to currency headwinds. PCG’s organic sales improvement was led by the flooring business, which benefited from its focus on maintenance and restoration and specified solutions for high-performance new construction projects. Emerging markets also contributed to growth.

Adjusted EBIT rose 9.4% on a year-over-year basis to $64.6 million and adjusted EBIT margin contracted 180 bps to 17.4%. MAP 2025 benefits and improved fixed-cost leverage from higher volumes aided the bottom line.

Consumer Group: Sales in the segment declined 6.1% year over year to $628.5 million, owing to weaker DIY takeaway at retail stores, rationalization of lower-margin products and customer destocking. Market share gains, aided by successful targeted marketing campaigns in international markets, partially offset the overall decline. Organic sales declined 5% and unfavorable foreign currency translation impacted sales by 1.1%.

The segment’s adjusted EBIT fell 4.1% from the prior year’s level to $116.2 million but the adjusted EBIT margin expanded 40 bps to 18.5%. EBIT declined due to reduced sales and unfavorable fixed-cost absorption from lower volumes. However, adjusted EBIT margin expanded on MAP 2025 benefits and the rationalization of lower-margin products.

Specialty Products Group or SPG: The segment’s sales totaled $174.6 million, which declined 3.5% on a year-over-year basis (down 4.8% organically). Yet, acquisition contributed 1.3% to sales growth. Lower disaster restoration business and softness in the specialty residential OEM end markets impacted the result. This was partially offset by food coatings and additives generated growth from new business wins and a small acquisition made during the quarter.

Adjusted EBIT for the quarter totaled $18.1 million, up 1.2% from the prior-year level, while the adjusted EBIT margin grew 50 bps to 10.4%. Adjusted EBIT was backed by MAP 2025 benefits, partially offset by under-absorption from lower volumes.

Balance Sheet

At the first-quarter fiscal 2025-end, RPM International had a total liquidity of $1.44 billion compared with $1.36 billion at fiscal 2024-end. This includes cash and cash equivalents of $231.6 million compared with $237.4 million at fiscal 2024-end.

Long-term debt (excluding current maturities) at the fiscal first-quarter end was $2.05 billion compared with $1.99 billion at fiscal 2024-end.

Cash provided by operations amounted to $248.1 million in the fiscal first quarter, down from $359.2 million in the year-ago period.

In the fiscal first quarter, capital expenditure was $50.7 million compared with $52.2 million in the year-ago quarter. The company returned $76.4 million to stockholders through cash dividends and share repurchases.

2Q25 Outlook

For second-quarter fiscal 2025, the company anticipates consolidated sales to be flat year over year. CPG sales are expected to increase in the low-single digits while PCG sales are likely to be flat year over year. SPG and Consumer Group are anticipated to decline in the low-single digits from the previous year.

RPM anticipates adjusted EBIT to rise in the mid-single digits from the year-ago period.

FY25 View

For fiscal 2025, RPM expects total net sales to increase in the low-single digits and adjusted EBIT to rise in the mid-single to the low-double-digit range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, RPM International has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, RPM International has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.