Why Paint And Coating Manufacturing Company RPM's Shares Are Seeing Blue Skies Today?

RPM International Inc RPM shares are trading higher after the company reported better-than-expected Q1 FY24 results and issued guidance.

Q1 sales grew 4.1% Y/Y to $2.01 billion, exceeding the consensus of $1.97 billion.

Geographically, European sales increased by around 10%, aided by improved construction businesses. Also, sales grew double-digit in Latin America and Africa/Middle East, led by continued demand for engineered solutions for infrastructure projects.

Frank C. Sullivan, RPM chairman and CEO, said, "Construction Products Group (CPG) entered the quarter with positive momentum, and this accelerated as it leveraged its focus on repair and maintenance as well as its turn-key service model to generate record sales and adjusted EBIT. Several businesses in the Performance Coatings Group (PCG) and CPG segments benefited from strong demand for their engineered solutions for infrastructure and reshoring projects. All our segments continued their execution of MAP 2025 initiatives, which is creating greater collaboration and enabling data-driven decision making to build a more efficient and agile RPM." 

Adjusted EBIT was up 12.3% Y/Y to $309.0 million, aided by higher sales sales and MAP 2025 benefits.

Adjusted EPS of $1.64 beat the consensus of $1.55. 

Operating cash flow reached $359.2 million compared to $23.6 million during the prior-year period, driven primarily by improved working capital management, MAP 2025 working capital initiatives, and operating margin expansion. 

The company returned $66.6 million to stockholders through cash dividends and share repurchases.

Total liquidity, including cash and committed revolving credit facilities, stood at $1.23 billion at the end of Q1. Total debt was $2.51 billion at the end of the quarter.

Outlook: For Q2, the company expects consolidated sales to increase in the low-single-digit percentage range Y/Y and adjusted EBIT to increase in the high-single to low-double-digit percentage range Y/Y. 

For FY24, the company reiterated the outlook for sales to increase in the mid-single-digit percentage range and adjusted EBIT to grow in the low-double-digit to mid-teen percentage range.

"Our outlook for the remainder of the fiscal year remains generally unchanged from our prior guidance, with continued strong execution of our business strategy and reduced headwinds from destocking and inflation resulting in strong growth and another year of record sales and profitability," added the CEO.

Price Action: RPM shares are up 6.51% at $98.84 on the last check Wednesday.