On Friday, JPMorgan adjusted its rating on RPM International Inc. (NYSE:RPM) stock, a company specializing in coatings and sealants, from Overweight to Neutral. The firm set a price target for RPM shares at $120.00.
The shift in rating follows RPM's stock performance approaching JPMorgan's previously established target. The company, along with its North American counterparts in the coatings industry such as Sherwin-Williams (NYSE:SHW), PPG Industries (NYSE:PPG), and Axalta Coating Systems (NYSE:AXTA), had been recommended by JPMorgan due to favorable market conditions.
These included declining costs for raw materials after a period of significant inflation and the ability of these companies to raise product prices to counterbalance the earlier hike in raw material costs.
RPM's pricing strategy has seen a gradual change over the fiscal year, with an initial average price increase of approximately 3.5%, tapering to around 0.5% by the end of the year.
Additionally, the cost of goods sold for RPM has stabilized, with the company's gross margin averaging 41% in Fiscal Year 2024, which ended in May, compared to 38% in the previous fiscal year on an adjusted basis.
Despite a flat cost of goods sold in the first and fourth quarters of Fiscal 2024, with sales around $2 billion, RPM's earnings per share (EPS) and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) saw year-over-year growth of 15% and 12%, respectively. However, JPMorgan anticipates a slowdown in growth, projecting an 11% increase in EPS and a 6% rise in EBITDA for Fiscal 2025.
Over the past two years, RPM's shares have performed on par with the S&P 500, with both seeing an increase of just under 40%.
In other recent news, RPM International Inc. has announced its Q4 and FY 2024 results, highlighting a record performance with its 10th consecutive quarter of record adjusted EBIT, a 12% increase, and record-high sales.
The company also reported an impressive operating cash flow of $1.12 billion, which was used to reduce its debt by $557 million. Despite challenging market conditions, RPM's Construction Products Group and Consumer Group demonstrated strong performance.
For the financial year 2025, the company anticipates low single-digit sales growth and mid-single-digit to low-double-digit adjusted EBIT growth. However, some challenges are expected, with the Specialty Products Group and Consumer Group projected to experience a low single-digit sales decline due to ongoing DIY softness.
RPM's management has outlined initiatives to drive EBIT growth, such as MAP 2025, plant consolidation, and SG&A streamlining. Despite certain segments facing headwinds, the company's robust balance sheet and cash flow are expected to enable strategic acquisitions and shareholder value enhancement through dividends and share repurchases. These are among the recent developments at RPM International Inc.
InvestingPro Insights
Following JPMorgan's recent rating update on RPM International Inc., current data from InvestingPro provides additional context for investors considering the company's stock. RPM's market capitalization stands at a robust $15.25 billion, highlighting its significant presence in the coatings and sealants industry. With a Price/Earnings (P/E) ratio of 24.32, the company trades at a premium relative to its earnings, which is further evidenced by a high Price/Book ratio of 6.08 as of the last twelve months ending Q4 2024.
InvestingPro Tips suggest that RPM has a history of rewarding shareholders, having raised its dividend for 10 consecutive years and maintained dividend payments for an impressive 52 years. This consistent return to shareholders is complemented by the company's solid financial position, with liquid assets surpassing short-term obligations. Additionally, RPM's stock is noted for low price volatility, which may appeal to investors seeking stability.
For investors looking for more detailed analysis and additional InvestingPro Tips, RPM's profile on Investing.com provides a comprehensive look at the company's financial health and stock performance, including a total of 11 tips for a deeper dive. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking further insights that can guide investment decisions.
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