RPM earnings and the read through for industrials

RPM International reported a strong fiscal second quarter for 2025, with adjusted EPS of $1.39 surpassing the consensus estimate of $1.34 and up from $1.22 in the prior year. The company also beat revenue expectations, delivering $1.85 billion, up 3% year-over-year, versus the $1.79 billion forecast. Key segments such as the Construction Products Group and Specialty Products Group saw notable sales growth, while adjusted EBIT increased 7.7% to a record $255.1 million, exceeding the $250.4 million estimate.

All four of RPM’s business segments posted sales and adjusted EBIT growth. The Construction Products Group led with 4.3% sales growth, supported by a 9% increase in adjusted EBIT. The Specialty Products Group outperformed expectations with a 16% rise in adjusted EBIT, driven by strong demand for high-performance construction and infrastructure projects. However, the Consumer Group faced margin pressure due to inflation, with its adjusted EBIT growing only 0.3% year-over-year.

CEO Frank C. Sullivan highlighted the company's record-setting performance, attributing it to the success of its MAP 2025 operating improvement initiatives. These initiatives included streamlining SG&A expenses, which decreased as a percentage of sales, and focusing on repair, maintenance, and high-performance construction projects. Sullivan also noted signs of stabilization in residential end markets, further supported by favorable weather conditions during the quarter.

Guidance for the fiscal third quarter indicates flat sales compared to prior-year record levels, with adjusted EBIT expected to grow or decline in the low-single-digit range. For the full fiscal year, RPM maintained its outlook for low-single-digit sales growth and narrowed its adjusted EBIT growth expectations to a range of 6% to 10%, signaling confidence in continued margin improvement.

RPM's commentary is significant for peers like PPG Industries (PPG) and Sherwin-Williams (SHW), as it provides insights into trends across the specialty coatings and construction materials markets. The company’s focus on high-performance construction and maintenance projects underscores ongoing demand in the sector, while residential market stabilization could be an indicator for broader industry trends.

Geographically, RPM’s performance varied, with North American businesses leading growth. European profitability improved significantly due to MAP 2025 initiatives, while strong demand in Africa and the Middle East offset declines in Latin America and Asia-Pacific. Currency headwinds and last year’s large project comparisons weighed on growth in some international markets.

Despite inflationary pressures in the Consumer Group, the overall commodity cycle was neutral during the quarter, and RPM's operating cash flow of $279.4 million supported $226.5 million in debt paydowns over the past year. This contributed to lower interest expenses, aiding profitability.

RPM’s strong execution amid mixed economic conditions, its focus on repair and maintenance markets, and its MAP 2025 operational improvements position it well for the rest of fiscal 2025. However, the company remains cautious about the impact of harsher winter weather and high mortgage rates, which could dampen momentum in the Consumer and Specialty Products Groups in the near term.