RPM Q3 Sales & EPS Exceed Expectations; Q4 Guidance Muted On Ongoing Economic Challenges

RPM International Inc RPM reported third-quarter FY23 sales growth of 5.7% year-over-year to $1.52 billion, exceeding the consensus of $1.47 billion.
Sales by segments: Construction Products Group $497.0 million (+3.1% Y/Y), Performance Coatings Group $299.6 million (+10.6% Y/Y), Specialty Products Group $191.0 million (+0.9%Y/Y) and Consumer Group $528.5 million (+7.5% Y/Y).
Adjusted EPS of $0.37 beat the consensus of $0.31. Gross margin expanded by 70 bps to 35.5%.
Adjusted EBIT increased 4.2% Y/Y to $83.9 million, driven by strong sales growth, improvement in Consumer Group margins, and MAP 2025 benefits. Unfavourable fluctuation in foreign currency, continued material cost inflation and lower fixed-cost leverage at facilities remained a concern in the quarter.
During the nine months of FY23, operating cash flow was $263.0 million compared to $156.0 million during the prior-year period.
RPM's total liquidity, including cash and committed revolving credit facilities, stood at $843.5 million as of Feb. 28, 2023. Total debt was $2.82 billion compared to $2.59 billion prior year.
RPM's quarterly dividend of $0.42 per share will be paid on Apr. 28, 2023, to stockholders of record on Apr. 13, 2023.
Chair and CEO Frank C. Sullivan said, "We remain on track to exceed our year-one MAP 2025 EBIT target of $120 million. Additionally, we are aligning resources with demand levels, launching new products over the next several quarters, and leveraging our strong positions in expanding end markets that serve infrastructure and reshoring projects."
4Q23 outlook: The company expects sales to be flat Y/Y and adjusted EBIT to be flat to down in the high-single-digit percentage range.
Price Action: RPM shares closed lower by 1.40% at $84.33 on Wednesday.

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