On Thursday, Wells Fargo adjusted its outlook on RPM International Inc. (NYSE:RPM), a chemical product manufacturer, by increasing the stock's price target to $134 from the previous $125, while keeping an Equal Weight rating on the shares. The firm acknowledged RPM International's robust quarterly performance, which was attributed to savings from the MAP to Growth initiative, which helped counterbalance a weaker demand in the do-it-yourself (DIY) sector.
RPM International's financial results were bolstered by cost savings, even as the company faced a lack of near-term volume growth. The analyst noted that while the current valuation stands at approximately 15.0 times the fiscal year 2025 estimated enterprise value to EBITDA (EV/EBITDA), the company could benefit from potential improvements in the housing market.
For the second fiscal quarter of 2025, Wells Fargo has revised its earnings per share (EPS) estimate for RPM International from $1.29 to $1.32, marking a year-over-year increase of 9%. This is based on an expected EBITDA of $293 million, which would be a 6% rise from the previous year. Despite anticipating a slight 0.4% year-over-year dip in total sales, the firm expects growth in the Construction Products Group (CPG) to offset declines in the Consumer and Specialty Products Group (SPG) segments.
Looking further ahead into the fiscal year 2025, Wells Fargo is maintaining its EPS forecast for RPM International at $5.40, signifying a 9% year-over-year growth. However, the EBITDA estimate has been marginally reduced from $1.204 billion to $1.186 billion, still reflecting a 7% increase year-over-year.
For fiscal year 2026, the company's EPS estimate remains unchanged at $6.00, which would represent an 11% increase year-over-year. The EBITDA projection is also maintained at $1.32 billion, up 11% from the previous year. This outlook is based on an expected sales growth of 3% year-over-year, driven by a low single-digit mix of volume and price growth.
In other recent news, RPM International Inc. faces a $190 million jury verdict in a legal dispute involving one of its subsidiaries. The company plans to challenge the verdict, citing it as unsupported by facts and law.
In financial news, RPM International reported record performance in its Q4 and FY 2024 results, marking its 10th consecutive quarter of record adjusted EBIT, with a 12% increase, and record-high sales. The company's operating cash flow reached $1.12 billion, which was used to reduce its debt by $557 million.
In analyst updates, BMO Capital adjusted the price target for RPM International to $139, maintaining an Outperform rating on the stock, while RBC Capital and JPMorgan set a price target for RPM shares at $120.00. This reflects a cautious stance due to expectations of a slowdown in the DIY consumer segment and other headwinds. Yet, BMO Capital remains optimistic about RPM's potential for fiscal year 2026, anticipating significant benefits from the company's Margin Acceleration Plan (MAP25) savings.
InvestingPro Insights
Recent data from InvestingPro adds depth to Wells Fargo's analysis of RPM International Inc. (NYSE:RPM). The company's market capitalization stands at $16.44 billion, with a P/E ratio of 25.16, indicating that investors are willing to pay a premium for RPM's earnings. This aligns with Wells Fargo's observation of the company's current valuation.
InvestingPro Tips highlight RPM's financial stability and growth potential. The company has maintained dividend payments for an impressive 52 consecutive years, demonstrating a strong commitment to shareholder returns. This is particularly relevant given Wells Fargo's positive outlook on RPM's future earnings growth.
Additionally, RPM's strong return over the last three months, with a 19.49% price total return, supports Wells Fargo's decision to raise the price target. The company's ability to generate profits, as indicated by its positive earnings over the last twelve months, reinforces the analyst's optimistic EPS forecasts for the coming fiscal years.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips on RPM, providing a deeper understanding of the company's financial health and market position.
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