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On Wednesday, BofA Securities analyst Steve Byrne adjusted the price target for RPM International (NYSE: NYSE:RPM), a company specializing in coatings and sealants, to $94.00 from the previous target of $117.00, while sustaining an Underperform rating on the stock. The adjustment comes as the stock trades near its 52-week low of $95.28, with InvestingPro data showing the stock has declined over 17% in the past week alone.
Byrne pointed to the anticipation of a deceleration in both commercial and residential construction and repair markets in the U.S. as the basis for the cautious stance on RPM International. Despite the company's solid fundamentals, including $7.3 billion in revenue and a healthy 41.37% gross margin, the analyst anticipates these sectors to be further affected by a probable slowdown in the U.S. economy, which may lead to postponed capital expenditures from both corporate entities and homeowners.
With only eight weeks remaining in the quarter, the impact on RPM's fourth fiscal quarter might be minimal. However, for fiscal year 2026, the analyst now projects a modestly negative organic sales growth of -2% in the company's Consumer Products Group (CPG), Performance Coatings Group (PCG), and Specialty Products Group (SPG), and -3% in its Construction Products Group (CG). This is a significant revision from the previously anticipated growth of +4%.
The revised price objective is derived from a combination of a Discounted Cash Flow (DCF) analysis, which now employs an 8.2% weighted average cost of capital (WACC) due to an increased risk-free rate and market risk premium, and a lower forward earnings multiple of 18.0x, decreased from 21.0x. The adjustment in the multiple reflects weaker comparables in the building products and coatings markets.
Despite the Underperform rating, Byrne acknowledged that any resolution to potential global trade conflicts could represent an upside potential for RPM International. The analyst's outlook remains conservative, with the new price target of $94 reflecting a more cautious expectation for the company's financial performance in the coming year. According to InvestingPro, RPM maintains strong fundamentals with a 53-year track record of consistent dividend payments and trades at an attractive PEG ratio of 0.79, suggesting potential value relative to its growth prospects. For deeper insights into RPM's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, RPM International Inc. announced its third-quarter 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company reported an EPS of $0.35, which fell short of the expected $0.51, and revenue of $1.48 billion, below the anticipated $1.51 billion. Analysts from firms such as Vertical Research Partners and Wells Fargo (NYSE:WFC) are closely monitoring the company's strategies to address these shortfalls. Despite the earnings miss, RPM generated $91.5 million in operating cash flow, marking it as the second strongest third quarter in its history. The company is also progressing with strategic acquisitions, including the Pink Stuff, to expand its offerings in the cleaning space, aiming to tap into a $12 billion market in North America. Looking ahead, RPM anticipates flat sales in the fourth quarter with modest earnings growth, driven by its Performance Coatings Group. The company continues to implement its MAP 2025 initiatives, which are expected to deliver a $100 million impact in fiscal 2026.
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