RPM Inc -4% tumbles despite topping earnings and sales estimates in Q3 (Feb) as investors disapprove of a bearish Q4 (May) revenue forecast
After competitor PPG Industries (PPG) raised its Q1 earnings outlook earlier this week following improving dynamics overseas, shares of RPM received a nice push, climbing over a percent higher on the day.
However, regarding overseas exposure, Sherwin-Williams (SHW) is a better comparison, as RPM derives around three-quarters of its revenue from the U.S., similar to SHW's ~80%.
As a result, RPM does not benefit as much from the positive developments in Europe, Latin America, and Asia Pacific as PPG. Instead, many of the challenging economic conditions RPM dealt with in Q3 are continuing in Q4 and, in some cases, intensifying.
For example, higher interest rates and tightening credit conditions are spurring heightened caution amongst RPM's customers.
RPM is focused on what it can control, including its upcoming product launches, investing in high-growth opportunities, reducing expenses, and taking appropriate actions to normalize inventories.
Looking beyond Q4, management expects tailwinds to result from the factors it can control. At the same time, specific profitability headwinds should begin to subside, such as material cost inflation.