On Thursday, Seaport Global Securities updated its assessment of RPM International (NYSE: NYSE:RPM), increasing the firm's stock price target on the stock to $150 from the previous $140, while sustaining a Buy rating. The adjustment follows RPM's first-quarter earnings, which surpassed expectations.
The firm has revised its revenue projections slightly lower but enhanced its margin forecast after RPM International reported an operating margin of 16.7%, surpassing the analyst's model despite weaker consumer revenue. The company's Margin Acceleration Plan (MAP) initiatives, including manufacturing consolidation, operational improvements, and commercial initiatives, are credited for the performance amid challenging demand conditions.
The analyst noted the Consumer segment as a variable in the company's future performance. A potential increase in housing turnover and restocking by large retailers could significantly boost earnings. However, caution is advised regarding the Consumer segment and the recovery pace in residential construction and do-it-yourself demand. Optimism remains for non-residential construction and RPM's supply-and-apply model, which benefits from labor-efficient wall systems and renovation solutions.
The Specialty segment is also anticipated to see some gains due to disaster restoration work following Hurricane Helene, although distributors still have existing inventory to sell through. Original equipment manufacturer (OEM) customers with exposure to new residential construction might experience benefits from lower interest rates.
The price target hike from $140 to $150 reflects greater confidence in RPM's potential for margin expansion and the possible benefits of a housing market recovery. The analyst maintains a Buy rating on the shares, which are currently trading at 14.3 times the forward twelve-month EBITDA estimate, above the three-year average of 13.4 times. This valuation suggests that the market may have already priced in some of the anticipated housing market improvements.
In other recent news, RPM International Inc. has been making headlines with a series of financial and legal developments. Wells Fargo recently revised its earnings per share (EPS) estimate for RPM International from $1.29 to $1.32 for the second fiscal quarter of 2025, marking a year-over-year increase of 9%.
This adjustment is based on an expected EBITDA of $293 million, a 6% rise from the previous year. Moreover, RPM International is facing a $190 million jury verdict in a legal dispute involving one of its subsidiaries, which the company plans to challenge.
RPM International also 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. Analysts from various firms have adjusted their price targets for RPM International, including BMO Capital, RBC Capital, and JPMorgan.
BMO Capital adjusted the price target for RPM International to $139 while maintaining an Outperform rating on the stock. RBC Capital and JPMorgan set a price target for RPM shares at $120.00. These adjustments reflect a cautious stance due to expectations of a slowdown in the DIY consumer segment and other headwinds.
However, BMO Capital remains optimistic about RPM's potential for fiscal year 2026, anticipating significant benefits from the company's Margin Acceleration Plan (MAP25) savings. These are among the recent developments at RPM International Inc.
InvestingPro Insights
Recent data from InvestingPro adds depth to the analysis of RPM International's performance and outlook. The company's market capitalization stands at $16.44 billion, with a P/E ratio of 25.16, indicating investors' willingness to pay a premium for RPM's earnings. This aligns with the analyst's optimistic view on the company's potential for margin expansion.
InvestingPro Tips highlight RPM's strong dividend history, having raised its dividend for 10 consecutive years and maintained payments for an impressive 52 years. This consistent dividend growth, coupled with a current dividend yield of 1.44%, underscores the company's financial stability and commitment to shareholder returns, which may be particularly attractive in the context of the housing market recovery mentioned in the article.
Moreover, RPM's stock has shown robust performance, with a 39.95% total return over the past year and is currently trading near its 52-week high. This strong momentum supports the analyst's decision to raise the price target and maintain a Buy rating.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips on RPM International, providing a broader perspective on the company's financial health and market position.
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