RPM International Inc. (RPM Quick QuoteRPM - Free Report) reported impressive second-quarter fiscal 2025 (ended Nov. 30, 2024) results with earnings and sales beating the Zacks Consensus Estimate. Both metrics increased on a year-over-year basis.

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This specialty chemicals manufacturer’s shares gained 1.1% yesterday, after it reported strong earnings on the back of record adjusted EBIT for the 12th consecutive quarter and reduced interest expenses. The bottom line improved on the continued implementation of MAP 2025 operational improvement initiatives. Efforts to streamline SG&A expenses supported this progress. The company also achieved a record adjusted EBIT margin and maintained strong operating cash flow.

Inside the Headlines

RPM’s adjusted earnings per share (EPS) of $1.39 beat the Zacks Consensus Estimate of $1.35 by 3% and increased 13.9% from the year-ago period. This upside was driven by reduced interest expenses from debt paydowns of $226.5 million in the last 12 months.

Net sales of $1.85 billion surpassed the consensus mark of $1.78 billion by 3.7% and increased 3% from the prior year’s $1.79 billion. This growth was driven by higher volumes across all four segments. The company focused on repair and maintenance while pursuing targeted organic growth opportunities. Strong performance was noted in technical solutions for high-performance construction, while residential markets showed signs of stabilization, supported by favorable weather conditions.

Geographically, sales increased 4.2% in North America (accounting for around 77% of total sales). Sales in Europe (15% of total sales) increased 1.2%, driven by MAP 2025 initiatives. The metric in Africa and the Middle East (2% of total sales) grew 11.6%, aided by spending on high-performance construction projects.

However, Latin America (4% of total sales) was down 9.5% year over year due to foreign currency headwinds. Asia Pacific (2% of total sales) also declined 5.3%, due to challenging year-over-year comparison.

Net sales grew 3.7% organically. However, divestitures, net of acquisitions, reduced sales by 0.1% and foreign currency translation impacted sales by 0.6%.

RPM’s Operational Discussion

Selling, general and administrative expenses, as a percentage of net sales, decreased to 28.7% from 29.2% reported a year ago.

Adjusted EBIT increased 7.7% year over year to $255.1 million. Adjusted EBIT margin improved 60 basis points (bps) year over year to 13.8%.

Segmental Details of RPM

Construction Products Group (CPG): In the reported quarter, segment sales increased 4.3% from a year ago to $690.1 million, owing to 4.9% organic growth and 0.1% contribution from buyouts. Foreign currency translation reduced sales by 0.7%. CPG achieved strong sales, driven by turnkey roofing systems, restoration efforts, a direct sales model and exceptional customer service.

Adjusted EBIT of $108.6 million was up 9% year over year and adjusted EBIT margin rose 60 bps to 15.7%. This was driven by sales growth and MAP 2025, partially offset by an unfavorable mix.

Performance Coatings Group (PCG): The segment’s sales increased 1.4% year over year to $374.9 million. Sales were up 3.3% organically but declined 1.1% due to divestitures, net of acquisitions and 0.8% owing to currency headwinds. PCG’s organic sales improvement was led by the flooring and protective coatings businesses, which benefited from its focus on high-performance construction projects.

Adjusted EBIT rose 6.7% on a year-over-year basis to $65 million and adjusted EBIT margin expanded 90 bps to 17.1%. MAP 2025 benefits and sales growth aided the bottom line.

Consumer Group: Sales in the segment increased 2% year over year to $590.2 million, driven by market share gains and stabilization in DIY takeaway, supported by favorable weather conditions. Successful targeted marketing campaigns drove strong growth in international markets. Organic sales increased 2.7%, while unfavorable foreign currency translation impacted sales by 0.7%.

The segment’s adjusted EBIT increased 0.3% from the prior year’s level to $96.6 million but the adjusted EBIT margin contracted 30 bps to 16.4%. Adjusted EBIT increased on the back of MAP 2025 benefits, sales growth and the rationalization of lower-margin products.

Specialty Products Group (SPG): The segment’s sales totaled $184.9 million, which increased 4.4% on a year-over-year basis (up 2.4% organically). This upside was driven by the disaster recovery business and its response to hurricanes. The acquisition contributed 1.5% to sales growth.

Adjusted EBIT for the quarter totaled $19.6 million, up 16% from the prior-year level, while the adjusted EBIT margin grew 100 bps to 10.6%. Adjusted EBIT growth was backed by MAP 2025 benefits and improved sales.

RPM’s Balance Sheet

At the second-quarter fiscal 2025-end, RPM International had a total liquidity of $1.50 billion compared with $1.36 billion at fiscal 2024-end. This includes cash and cash equivalents of $268.7 million compared with $237.4 million at fiscal 2024-end.

Long-term debt (excluding current maturities) at the fiscal second-quarter end was $2.02 billion compared with $1.99 billion at fiscal 2024-end.

Cash provided by operations amounted to $527.5 million in the first six months of fiscal 2025, down from $767.8 million in the year-ago period.

In the first six months of fiscal 2025, capital expenditure was $100.7 million compared with $89.3 million in the year-ago quarter. The company returned $159.5 million to its stockholders through cash dividends and share repurchases.

RPM’s FY25 3Q Outlook

For third-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 to slightly up 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 grow or decline in the low-single digits from the year-ago period.

RPM’s FY25 View Updated

For fiscal 2025, RPM still expects total net sales to increase in the low-single digits percentage from a year ago.

Furthermore, it expects consolidated adjusted EBIT to grow between 6% and 10% from prior-year results. The estimated range is narrower than the previous outlook of mid-single-digit to low-double-digit growth.

RPM’s Zacks Rank

RPM International currently carries a Zacks Rank #3 (Hold).

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