RPM International is advancing higher in the accelerated forecast
RPM International (NASDAQ: RPM) Not only because it is in a very good position on our radar for post-Covid economic recovery and expansion, but also because it is a clear indicator of economic conditions. The company manufactures paints, coatings and specialty products for the construction, industrial and consumer groups, and this affects businesses not only in many parts of the economy but throughout the system at the forefront of inflationary pressures. Takeaway Hall from FQ3 reports that the company’s global supply chain problems have been well-navigated, but those conditions are getting worse in the near future. This means growing business for RPM International now, but the economy is likely to stagnate.
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“RPM’s operations and its suppliers are expected to be affected by ongoing supply chain challenges and raw material shortages, which will put pressure on revenue and productivity. . . Although the sale of RPMs to Ukraine and Russia is unreasonable, Russian sanctions have pushed up energy and transportation costs. They are creating supply challenges for plant-based raw materials, as well as oil derivatives. Although it’s too early to realize, rising interest rates could slow business and consumer spending in the coming months. “
RPM International has a record-setting quarter
Although no high prices were mentioned for its products, RPM International’s record-setting quarterly was driven, in part, by demand and in part by higher prices. The good news is that $ 1.43 billion in revenue is up 12.6% from last year and beating the consensus by 140 basis points, the bad news is that business could have been better had it not been for the supply chain challenge. The strength was driven by growth in all segments led by a 21.7% increase in construction followed by a 19.6% increase in performance coating, an 11.9% increase in specialty covers and a 2.9% increase in the consumer group.
Taking the report downwards, the company posted a small 2.3% increase in YOY EBIT thanks to higher prices but both net income and mixed earnings are lower than last year. This is because of the initial restructuring costs, one-time items, and higher input costs that dropped GAAP earnings to 0.25, down 13.8% from last year. On a consistent basis, things look better but the effects of inflationary pressures still exist. The consistent EPS of $ 0.38 has lost consensus by $ 0.08 but is only flat compared to last year.
Looking ahead, the company expects to get a strong Q4 backed by strength in most end markets. The company is leading the way in revenue and EBIT growth among low-income teens which will be the 4th quarter of accelerated growth, a company record, and above 19% growth last year.
Technical Outlook: RPM International is in reversal
Shares of RPM International reached a low in March and are now confirming a reversal. Shares in the post-release price action are above 4.0% and above a key resistance point that is consistent with the short-term moving average. Price action may consolidate to new heights or even go back to re-testing support at $ 84 before going higher but we expect to see higher prices. If the news and data support a positive outlook, our target for the stock is near the $ 92 level at the moment. 
