Will 2020 MAP to Growth Initiative Drive RPM's Q3 Earnings?

RPM International Inc. RPM is scheduled to report third-quarter fiscal 2020 results on Apr 8, before the opening bell.

In the last reported quarter, the company’s top and bottom lines surpassed the Zacks Consensus Estimate by 0.3% and 4.1%, and improved 2.8% and 31% on a year-over-year basis, respectively. The upside was driven by the 2020 MAP to Growth initiative, strong pricing and moderate raw material inflation.

Trend in Estimate Revision

The Zacks Consensus Estimate for fiscal third-quarter earnings per share has been unchanged at 20 cents over the past 60 days. This indicates an increase of 42.9% from the year-ago reported figure of 14 cents per share. The consensus mark for revenues is $1.18 billion, suggesting a 3.4% year-over-year improvement.

RPM International Inc. Price and EPS Surprise

RPM International Inc. Price and EPS Surprise

RPM International Inc. price-eps-surprise | RPM International Inc. Quote

Factors Supporting Growth

RPM is likely to have witnessed modest year-over-year sales growth in the fiscal third quarter, which is a seasonally weak period, supported by solid inorganic moves and growth across the business.

The company expects revenues, adjusted EBIT and earnings to be at the higher end of its previously announced guidance for the fiscal third quarter. It projects revenue growth in the range of 2.5-4%. It also anticipates adjusted EBIT growth within 25-30% and adjusted earnings in the high-teens to low-20-cent range.

RPM’s focus on strategic acquisitions to drive top-line growth and gain market share bodes well. Also, its 2020 MAP to Growth operating improvement plan — comprising efforts to reduce costs by closing plants, merging IT system, centralizing more of its back-office functions and rationalizing manufacturing footprint — is likely to have boosted bottom-line performance in the to-be-reported quarter.

RPM’s supply chain and business operations remain strong amid the COVID-19 outbreak. Moreover, management has revealed that the company intends to meet the changing needs of customers in this unprecedented period. Although negative impact of foreign currency translation, and higher costs and expenses are likely to have been pressing concerns, cost-saving initiatives are expected to have helped it offset these woes.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for RPM this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP for RPM is -0.83%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Louisiana-Pacific Corporation LPX has an Earnings ESP of +10.11% and holds a Zacks Rank #3.

MasTec, Inc. MTZ has an Earnings ESP of +11.97% and a Zacks Rank #3.

Quanta Services, Inc. PWR has an Earnings ESP of +4.31% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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