RPM International Inc.’s (RPM) fiscal 2010 fourth-quarter GAAP earnings grew 54.0% to $60.5 million from $39.3 million in the year-ago quarter. Excluding special items, adjusted earnings per share came in at 53 cents, which topped the Zacks Consensus Estimate of 51 cents. The better-than-expected performance mainly stemmed from higher sales and improved gross margin.
RPM manufactures and markets specialty paints, protective coatings and roofing systems, sealants and adhesives, for use in both industrial and consumer applications. The company’s industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and specialty chemicals. RPM’s consumer products are used for home maintenance and improvement, boat repair and maintenance and by hobbyists.
Quarterly Details
RPM recorded a 13.3% year-over-year growth in sales to $971.5 million, which easily surpassed the Zacks Consensus Estimate of $916 million. The growth was primarily driven by higher volumes, favorable foreign currency translations and acquisitions.
In terms of segments, RPM’s Industrial division logged a growth of 12.9% year-over-year in sales to $633.0 million due to higher volumes on the back of stabilization in U.S. commercial construction markets coupled with favorable foreign currency translations. The Consumer segment’s sales grew 14.0% year-over-year to $338.5 million driven by volume growth and favorable currency translations. The volume growth mainly stemmed from maintenance and repair products and new product launches.
Gross margin expanded 130 basis points (bps) year-over-year to 43.1%, primarily due to favorable product mix and better plant utilization, partially offset by higher raw material costs. RPM’s operating income recorded a growth of 15.6% year-over-year to $113.0 million, while operating margin improved 20 bps to 11.6%. The growth was mainly attributable to higher sales and gross margin, partially offset by a 17.3% year-over-year increase in selling, general & administrative expenses to $305.5 million.
Balance Sheet and Cash Flow
RPM ended the quarter with cash and equivalents of $215.4 million, and long-term debt-to-capitalization of 44.4%, compared to cash balance of $253.4 million and long-term debt-to-capitalization of 44.9% in the year-ago period. During fiscal 2010, RPM generated $203.9 million of cash from operations and deployed $105.4 million towards dividends, $105.4 million towards investments, $74.0 million towards acquisitions and $23.2 million towards capital expenditure.
Outlook and Zacks Consensus
Looking ahead, RPM expects sales of $3.25 billion and adjusted earnings of $1.35 to $1.40 per share in fiscal 2011 after incorporating the impact of deconsolidation of certain subsidiaries. The guidance is well below the Zacks Consensus Estimate of $1.61 per share, which moved down 2 cents over the past month as 1 of 9 covering analysts reduced projection, while 1 moved in the opposite direction.
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