RPM International Inc. (RPM) on April 06, 2016 reported record sales and EBIT for its fiscal 2016 third quarter ended February 29, 2016, despite the strong U.S. dollar and overall weakness in many global markets outside the U.S.
Third-Quarter Results
Net sales grew 4.5% to $988.6 million in the fiscal 2016 third quarter from $946.4 million in the fiscal 2015 third quarter. Consolidated earnings before interest and taxes (EBIT) were $42.1 million, up 23.1% from $34.2 million a year ago. Net income of $18.6 million in the fiscal 2016 third quarter compares to a reported loss of $57.3 million a year ago. Third-quarter diluted earnings per common share were $0.14, compared to a year-ago reported loss of $0.44.
The year-ago loss for the quarter was due to a one-time, non-cash net charge for a tax accrual related to possible repatriation of overseas earnings to fund future obligations for the company’s Specialty Products Holding Corp. (SPHC) bankruptcy settlement. On an as-adjusted basis, earnings per diluted share were $0.20 in the prior year’s third quarter, which included a $13.0 million or $0.10 per share tax benefit.
“We were pleased with RPM’s performance during our seasonally slow third quarter, considering the headwinds posed by foreign currency translation, which reduced sales by 4.2% in the quarter, along with declining economies in a number of the international markets we serve,” stated Frank C. Sullivan, RPM chairman and chief executive officer. “We were able to leverage good sales growth into EBIT growth of 23%.”
Third-Quarter Segment Sales and Earnings
Industrial segment sales declined 3.1% to $484.0 million from $499.6 million in the fiscal 2015 third quarter. Organic sales improved 2.6%, while acquisitions added 0.7%. Foreign currency translation negatively impacted sales by 6.4%. Industrial segment EBIT for the quarter of $2.1 million, was $6.7 million below last year’s EBIT of $8.8 million. During the quarter, the industrial segment had $6.9 million in higher product warranty expenses and severance-related charges across businesses operating in weaker end markets. Excluding these items, industrial EBIT would have been up slightly year over year.
“Results from our industrial segment continue to be mixed by both end markets and geography. Our U.S. based industrial companies serving the commercial construction markets enjoyed high single-digit growth. However, our businesses with exposure to the global energy sector continue to be down by about 10%. Geographically, our Latin American industrial businesses showed strong organic growth in local currencies, while performance by businesses in Europe was somewhat choppy,” stated Sullivan.
RPM International Inc. earnings per share showed a decreasing trend of -18.3% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 276%.Analysts project EPS growth over the next 5 years at 9%. It has EPS annual growth over the past 5 fiscal years of 5% when sales grew 6.1. It reported 4.5% sales growth, and 132% EPS growth in the last quarter.
The stock is trading at $50.19, up 37.21% from 52-week low of $36.78. The stock trades down -2.73% from its peak of $51.6 and -0.72% below the consensus price target of $49.83. Its volume clocked up at 0.58 million shares which is lower than the average volume of 0.68 million shares. Its market capitalization currently stands at $6.71B.
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