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On Wednesday, UBS analyst Joshua Spector adjusted the price target for RPM International (NYSE: NYSE:RPM) to $113.00, a decrease from the previous $113.00, while reiterating a Neutral rating on the stock. According to InvestingPro data, RPM's stock has experienced significant pressure, declining over 17% in the past week and currently trading near its 52-week low of $95.28. Analysis suggests the stock is currently undervalued compared to its Fair Value. Spector anticipates more attention to the company's outlook, as recent weather and inventory decisions have had a significant impact on RPM's smaller February quarter. The guidance for low single-digit percentage growth in earnings before interest and taxes (EBIT) year-over-year for the May quarter is seen as slightly below investor expectations, according to Spector, although he notes that the exact investor sentiment is difficult to gauge due to market fluctuations over the last week.
RPM International, which focuses on repair and remodel products, is expected to witness mixed segment performance. Performance Coatings sales are projected to grow at a mid-single-digit percentage in the May quarter, while Construction is anticipated to remain flat, marking potentially the weakest quarter since May 2020, aside from the recent February quarter decline. Despite these challenges, InvestingPro data reveals RPM's strong financial foundation, with a GREAT overall health score and an impressive 53-year track record of maintaining dividend payments. The company's current dividend yield stands at 2.1%, with 11 consecutive years of dividend increases. This could pose a risk to one of RPM's key growth drivers.
The UBS Machinery/Construction team has revised their outlook for U.S. non-residential spending, forecasting low single-digit percentage declines in 2025, which could negatively affect RPM. While the company's backlog is expected to provide some support through the May quarter, there is likely low visibility for the fiscal year ending in May 2026, and no significant comments are expected during the upcoming earnings call.
RPM has also updated its raw material inflation expectations, increasing them to a mid-single-digit percentage from a previous low single-digit percentage. This adjustment reflects the challenges RPM may face in managing costs compared to other companies in the coatings industry, which are expected to maintain a low single-digit percentage inflation outlook, though likely at the higher end of that range.
Despite these challenges, Spector notes that savings from RPM's "MAP to Growth" initiative may provide some offset to the negative impacts of macroeconomic uncertainty and price/cost pressures. Consequently, while the Neutral rating is maintained, UBS has lowered its estimates for RPM to account for increased raw material costs and reduced growth expectations compared to their prior analysis. InvestingPro subscribers have access to 12 additional exclusive ProTips and comprehensive analysis of RPM's financial health, including detailed metrics showing the company's strong current ratio of 2.22 and healthy gross profit margin of 41.11%. For deeper insights into RPM's valuation and future prospects, access the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, RPM International reported its third-quarter 2025 earnings, which fell short of expectations, with an earnings per share (EPS) of $0.35 compared to the forecasted $0.51. The company's revenue also missed projections, coming in at $1.48 billion against the anticipated $1.51 billion. External factors such as unfavorable weather and foreign currency translation were cited as reasons for the financial performance. Despite these challenges, RPM generated $91.5 million in operating cash flow, marking one of its strongest third quarters in history. In analyst news, BofA Securities adjusted RPM's stock price target to $94, maintaining an Underperform rating. This adjustment reflects concerns about a potential slowdown in the U.S. economy impacting RPM's key markets. The analyst's revised outlook for fiscal year 2026 projects a modestly negative organic sales growth in several of RPM's groups. Additionally, RPM is engaged in strategic acquisitions, including the Pink Stuff, which aims to expand its offerings in the cleaning space. The acquisition is expected to close late in the fourth quarter of fiscal 2025 or early in fiscal 2026.
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