RPM International Inc. RPM has captured the attention of investors with its impressive performance. After hovering around $130.00 per share for the past six trading sessions, the stock reached a new 52-week high of $134.56 yesterday. It then pulled back slightly to close the trading session at $132.65, marking a 0.7% decrease from the previous day's closing price of $133.54.
Shares of RPM have surged 7.8% in the past month, outperforming the 2.6% growth in the Zacks Paints and Related Products industry. The stock has also surpassed the broader Construction sector and the S&P 500's growth of 0.8% and 3.9%, respectively, in the same period.
The recent strong performance of RPM International puts it ahead of its peers like Masco Corporation MAS and Frontdoor, Inc. FTDR, whose shares moved up 4.8% and 5.3%, respectively, in the past month. It also outpaced Gibraltar Industries, Inc. ROCK, which saw a 5.7% decline during the same period.
This Medina, OH-based specialty chemicals manufacturer is capitalizing on increased infrastructure demand and a focus on the repair and maintenance business. RPM International continues to implement its MAP 2025 operational improvement initiatives while leveraging its broad product portfolio.
The company is adapting to challenging economic conditions by targeting growing end markets, improving operational efficiency and investing in strategic growth initiatives. As it moves into fiscal 2025, RPM International expects to further benefit from MAP 2025 and achieve additional margin expansion.
RPM’s 1-Month Price Performance
Image Source: Zacks Investment Research
Key Fundamentals Supporting RPM Stock's Growth
Efficient execution of MAP 2025 initiatives: RPM International continues to make solid progress with its MAP 2025 initiative, unveiled in August 2022 to maximize operational efficiencies and generate superior value for its customers, associates and shareholders through 2025. The company delivered record-high adjusted earnings and EBIT in the first quarter of fiscal 2025, while remaining on track to achieve significant cost savings and margin improvements throughout the year.
The company is on track to reach the original target of $465 million in projected MAP 2025 savings, indicating an expected $185 million in annualized MAP benefits by May 31, 2025. RPM International is optimistic about meeting or exceeding this savings goal.
The company also anticipates further improvements in year-over-year gross margins for the second quarter of fiscal 2025, driven by its ongoing MAP 2025 initiatives. By the end of May 2025, the company expects to achieve a 16% adjusted EBIT margin alongside a 42% gross profit margin, reflecting the positive impact of its operational improvement efforts.
Strong Infrastructure Demand Trends: RPM International has been capitalizing on the rising demand for infrastructure in global markets. The company’s strategic emphasis on repair and maintenance, along with RPM’s expansion into new construction markets, has driven growth within its Construction Products Group (“CPG”) and Performance Coatings Group (“PCG”). RPM International has been effectively navigating a challenging environment while achieving impressive operational performance through innovative products and a strong sales approach.
The company has been actively responding to the growing demand in end markets, particularly in data center construction, which has seen significant spending increases in the past year. The company plays a vital role in constructing these high-performance buildings. Its products and services are designed to meet the stringent requirements of data centers and support ongoing maintenance and repairs. This focus on meeting the needs of expanding markets positions RPM for continued success and growth.
Solid Fiscal 2025 Outlook: RPM International anticipates a positive outlook for fiscal 2025, driven by its enhanced procurement teams and the implementation of CS-168. This progress allows the company to adjust pricing in response to raw material cost increases more effectively. In the CPG, RPM expects to outperform market growth through its differentiated product and service offerings. The group is set to benefit from increased spending on infrastructure, high-performance buildings and restoration projects, even as office construction remains sluggish.
With the PCG, RPM continues to capitalize on rising investments in infrastructure projects and high-performance buildings. While spending on reshoring projects may moderate in some sectors, such as battery plants, the company anticipates expansion in areas like data centers and pharmaceutical manufacturing, contributing to overall growth in fiscal 2025.
Strong Cash Flow and Efficient Capital Allocation: The company has sustained strong cash flow momentum from fiscal 2024 into the first quarter of fiscal 2025. This positive trend has facilitated significant debt repayment and shareholder returns, showcasing the company's commitment to financial health and strategic growth.
RPM has repaid an additional $75 million in debt in the fiscal first quarter, bringing the total repayment over the past 12 months to $453 million. This substantial reduction in debt has led to lower interest expenses. Combined with adjusted EBIT growth, these factors have contributed to a 12.2% increase in adjusted EPS, which has reached a record high of $1.84. (read more: RPM International Q1 Earnings Beat Estimates, Margin Rises Y/Y).
Ongoing investments in strategic initiatives further underscore the company’s focus on long-term growth and stability. RPM is set to open a new production facility in Belgium by the end of the calendar year, enhancing its procurement strategy.
Estimate Revision of RPM Stock
The Zacks Consensus Estimate for RPM’s fiscal 2025 earnings has trended upward in the past 30 days. The estimated figure indicates growth of 12.4% from a year ago. The consensus estimate for fiscal 2026 earnings has moved up in the said time frame, indicating 11.6% year-over-year growth.
Image Source: Zacks Investment Research
RPM Trading at a Premium
RPM stock is currently slightly overvalued compared to its industry, as shown in the chart below. A high valuation raises concerns about the sustainability of its current price if the company's future performance does not meet investors’ expectations.
Image Source: Zacks Investment Research
Why Is RPM Stock Still a Buy?
Despite trading near its 52-week high, RPM International remains a compelling investment in the specialty chemicals sector. The company is effectively capitalizing on increased infrastructure demand while focusing on repair and maintenance. Its MAP 2025 operational improvement initiatives have delivered solid growth, resulting in record adjusted earnings and EBIT in the first quarter of fiscal 2025.
With strong financials and upward estimate revisions for fiscal 2025, RPM International demonstrates the potential for continued growth. RPM is on track to achieve $465 million in projected MAP savings, enhancing its operational efficiencies. The company's strategic investments in high-demand markets, such as data center construction, position it well for continued success.
As a Zacks Rank #2 (Buy) company, RPM's dedication to shareholder value through disciplined capital allocation and effective debt management highlights its long-term growth potential. Investors seeking exposure in the dynamic specialty chemicals industry should consider RPM International as a strong option. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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