RPM International’s stock plunges 8% after Q2 results miss expectations

RPM International Inc. (RPM) missed market estimates on revenue and earnings for the second quarter of 2019, sending shares plummeting over 8% in premarket hours on Friday.

Net sales grew 3.6% to $1.36 billion compared to the same period last year. Net income dropped to $49.2 million or $0.37 per share from $95.5 million or $0.70 per share in the year-ago quarter, hurt by restructuring and other charges, along with adverse impacts from higher raw material costs, foreign exchange and a new accounting standard. Adjusted EPS was $0.52.

During the quarter, net sales in the industrial segment grew 2.1% to $718 million, reflecting organic growth of 3.3% and acquisitions contributing an additional 1.5%. Sales in the consumer segment rose 4.1% to $432.6 million while sales in the specialty segment grew 7.6% to $212 million.

Chairman and CEO Frank C. Sullivan stated, “We achieved solid topline improvement with sales growth of 3.6%, despite the unfavorable foreign currency translation effect of 2.0%. Like many manufacturers, our bottom line was impacted by a continued rise in costs for raw materials, freight, labor and energy, as well as adverse foreign exchange translation. SG&A improved by 30 basis points, and adjusted SG&A, excluding restructuring expenses, improved by 100 basis points versus last year’s second quarter. Restructuring activities related to our MAP to Growth operating improvement plan, the details of which we shared at an investor day on November 28, are well under way. Our plan is focused on driving greater efficiency and long-term profitability of the business to enhance shareholder value.”

RPM’s Q1 profit plunges due to higher costs

During the second quarter, RPM closed five manufacturing plants, cut 149 positions and started its transition to center-led manufacturing and procurement functions.

For the third quarter of 2019, revenue is expected to grow in the low to mid-single digit range. EPS is expected to come in a range of $0.10 to $0.12, due to impacts from a tax rate of around 26% and the effects of a new accounting standard.

RPM is focused on the execution of its MAP to Growth operating improvement plan and is targeting a 540-basis point improvement in its operating margin by May 31, 2021. The company also intends to return $1.5 billion in capital to its stockholders by May 31, 2021 through a combination of dividends and share repurchases.

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