RPM: Why RPM International Stock Belongs in Your Portfolio

RPM International (RPM) is one of the 9 stocks featured in a new special report. Claim your copy now! 9 “MUST OWN” Growth Stocks for 2021.

If there is one thing that the coronavirus pandemic forced us to do, it was to stay home. And if you’re forced to be in your home all day, it’s time to make some upgrades. Home improvement was one of the biggest beneficiaries of the stay-at-home trend, and RPM International was there to rake in the profits.

The company manufactures and sells a variety of paints, coatings, and adhesives. As you can imagine, these products have come quite in handy as industrial projects ramp up. Its brands include Rust-Oleum, Dap, Day-Glo, Dryvit, Illbruck, Carboline, Stonhard, and Tremco. Its subsidiaries market products in 164 countries and operate 120 manufacturing facilities worldwide.

RPM is also a Dividend Achiever stock as it has increased its annual dividend payout for 45 consecutive years. If the stock was in the S&P 500, it would be considered a Dividend Aristocrat.

MAP to Growth

Much of its recent success can be attributed to its 2020 “MAP to Growth plan.” The company rolled out the plan in November 2018 to optimize its manufacturing facilities and provide more efficient plant and distribution facilities. So far, it’s been a success, as the company saw earnings and margin growth in 2020 and the first-quarter fiscal 2021.

This is due to a significant level of integration from manufacturing supply chain consolidation and procurement. This has reduced costs by closing plants, and merging IT systems, and centralizing back-office functions. During the fiscal second quarter, RPM announced that it closed two plants, which brought the total to 25 out of the previously announced 31 plant closures. The program is expected to conclude sometime this year with $290 million in annualized savings.

Strong Earnings

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The company recently delivered strong earnings results, posting $1.06 share vs. the consensus of $1.00 a share. Earnings were up 39.5% year over year. Organic sales were up 3.5%, driven by continued strength in its Consumer segment, which was up 15.2%. Its EBIT margins were also up, driven by lower raw material costs and MAP to Growth cost savings.

Momentum in the consumer business and construction products should drive additional sales growth in fiscal year 2021 due to renovation spending and a bullish construction market. Margin expansion should also continue due to the company’s MAP to Growth plan.

Acquisitions

Acquisitions have been a big part of RPM’s growth strategy. In September, the company acquired sandpaper manufacturer Gator Finishing Products. This adds abrasives to its lineup of patch, repair, and cleaning products. The company made three buyouts in fiscal 2020, five in fiscal 2019, and seven more in fiscal 2018. These acquisitions added 1.1% to sales in fiscal 2020 and 1.4% in fiscal 2019. So far, in fiscal 2021, acquisitions have contributed 1.4% to sales.

POWR Ratings

RPM has an overall grade of A, indicating a Strong Buy rating in our POWR Ratings system. The company also has a Growth Grade of A, which is not surprising as it saw its earnings rise 40% over the past year. Analysts expect its earnings to be up 52% this quarter and 39% for the year. RPM has a Value Grade of B, making it a GARP stock or growth at a reasonable price due to its forward P/E of 17.45.

The company has a Quality Grade of B due to its strong balance sheet and liquidity. RPM has no significant debt maturity until November 2022. The company also has strong grades in its other components, which you can find here. Plus, the stock is ranked #2 in the A-rated Chemicals industry. Find other top Chemical stocks by clicking here.

Note that RPM is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

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RPM shares rose $0.96 (+1.20%) in after-hours trading Thursday. Year-to-date, RPM has declined -11.25%, versus a 2.26% rise in the benchmark S&P 500 index during the same period.

About the Author: David Cohne

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...