RPM International Inc. RPM reported dismal third-quarter fiscal 2025 (ended Feb. 28, 2025) results, with earnings and net sales missing the Zacks Consensus Estimate and declining year over year.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

The quarterly results reflect soft contributions from all the company’s reportable segments due to unfavorable foreign exchange translation and unfavorable weather conditions limiting construction and restoration activity accompanied by lower demand in specialty OEM manufacturing end markets and the disaster restoration business.

Nonetheless, the company’s focus on its MAP 2025 plan is expected to boost margins in the upcoming quarters.

RPM stock tumbled 9.1% during Tuesday’s trading hours and inched down 1% in the after-hours in response to the quarterly results. Bleak expectations of fourth-quarter fiscal 2025 likely to have suppressed investors’ sentiments.

Inside RPM’s Headlines

The company’s adjusted earnings per share (EPS) of 35 cents missed the Zacks Consensus Estimate of 52 cents by 32.7%. In the year-ago quarter, the company reported an adjusted EPS of 52 cents.

Net sales of $1.48 billion also lagged the consensus mark of $1.52 billion by 2.5% and tumbled 3% year over year.

Geographically, sales declined 2.5% in North America (accounting for around 76% of fiscal third-quarter total sales) due to adverse weather conditions. Sales in Europe (15% of total sales) decreased 1.2% due to unfavorable foreign currency translation, partially offset by benefits realized from sales and marketing initiatives. The metric in Africa and the Middle East (2% of total sales) inched down 0.8% because of challenging year-over-year comparisons wherein sales increased 22.9%.

However, sales in Latin America (4% of total sales) were down 13.8% year over year due to foreign currency headwinds and challenging year-over-year comparisons. Furthermore, the metric in Asia Pacific (3% of total sales) also declined 9.3% due to challenging year-over-year comparison and unfavorable foreign currency translation.

Net sales declined 1.8% organically during the quarter. However, divestitures, net of acquisitions, aided sales by 0.5% while foreign currency translation adversely impacted sales by 1.7%.

RPM’s Operational Discussion

Selling, general and administrative expenses, as a percentage of net sales, increased 90 basis points (bps) to 34% from 33.1% reported a year ago.

Adjusted EBIT declined significantly by 29% year over year to $78.2 million. Adjusted EBIT margin contracted 190 bps to 5.3%.

Segmental Details of RPM International

Construction Products Group (CPG): In the reported quarter, the segment’s sales slipped 4.5% from a year ago to $473.4 million, owing to a 1.7% organic sales decline and a 3% foreign currency translation impact, partially offset by 0.2% contribution from buyouts. CPG faced challenges due to unfavorable weather conditions and limited construction and restoration activity, particularly in the southern and western United States.

Adjusted EBIT of $12.7 million was down 37.9% year over year, and adjusted EBIT margin contracted 140 bps to 2.7%. Temporary inefficiencies from plant consolidations adversely impacted profitability, which was partially offset by SG&A streamlining actions.

Performance Coatings Group (PCG): The segment’s sales inched down 0.8% year over year to $340.6 million. Sales were down 0.3% organically, with 1.6% impacts from foreign currency headwinds, but up 1.1% due to divestitures, net of acquisitions. Businesses producing fiberglass-reinforced plastic structures drove growth due to demand from data centers, which was offset by businesses experiencing declines due to challenging comparisons.

Adjusted EBIT was down 7% on a year-over-year basis to $43.8 million and adjusted EBIT margin contracted 80 bps to 12.9%. Lower fixed-cost utilization, plant start-up costs and negative currency impact marred the prospects.

Specialty Products Group (SPG): The segment’s sales totaled $158.7 million, which declined 10.1% year over year (down 10.9% organically). This downtrend was due to lower demand in specialty OEM markets and the disaster restoration business, which was impacted by a decline in remediation activity. The acquisition contributed 1.4% to sales growth.

The segment’s adjusted EBIT totaled $6.7 million, down 44.5% from the prior-year level, with the adjusted EBIT margin tumbling 270 bps to 4.2%. Adjusted EBIT downtrend was caused by lower fixed-cost utilization from reduced volumes and expenses associated with new resin and innovation centers of excellence. This was partially offset by MAP 2025 initiatives and SG&A streamlining actions.

Consumer Group: Sales in the segment inched down 0.7% year over year to $503.8 million due to unfavorable foreign exchange translation partially offset by new product introductions and market share gains. Organic sales grew 0.3%, while unfavorable foreign currency translation impacted sales by 1%.

The segment’s adjusted EBIT was down 16.6% from the prior-year level to $54.2 million, and the adjusted EBIT margin contracted 200 bps to 10.8%. Challenging year-over-year comparisons wherein adjusted EBIT grew 34.6% marred the growth trend.

RPM’s Balance Sheet

At the end of the fiscal third quarter 2025, RPM International had a total liquidity of $1.21 billion compared with $1.36 billion at the fiscal 2024-end. This includes cash and cash equivalents of $241.9 million compared with $237.4 million at fiscal 2024-end.

Long-term debt (excluding current maturities) at the fiscal third-quarter end was $2.09 billion compared with $1.99 billion at fiscal 2024-end.

Cash provided by operations amounted to $619 million in the first nine months of fiscal 2025, down from $941.1 million in the year-ago period.

In the first nine months of fiscal 2025, capital expenditures were $158.9 million compared with $138.1 million in the year-ago quarter. During the same time frame, RPM returned $242.6 million to its stockholders through cash dividends and share repurchases.

RPM's Q4 Outlook

For fourth-quarter fiscal 2025, the company anticipates consolidated sales to be flat year over year. CPG sales are expected to be flat as well, while PCG sales are likely to be up in the mid-single-digit percentage range year over year. Sales in the SPG and Consumer Group segments are anticipated to decline in the low-single-digit percentage range compared to the previous-year quarter.

RPM anticipates consolidated adjusted EBIT to be up in the low-single-digit percentage range year over year.

RPM’s Zacks Rank & Stocks to Consider

RPM International currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Here are some better-ranked stocks from the Basic Materials sector.

Carpenter Technology Corporation CRS currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 15.7%, on average. The stock has moved down 7.4% year to date.

The Zacks Consensus Estimate for Carpenter Technology’s fiscal 2025 sales and EPS implies an increase of 5.3% and 46.6%, respectively, from a year ago.

Osisko Gold Royalties Ltd OR currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of 4.4%, on average. The stock has moved down 7.4% year to date.

The Zacks Consensus Estimate for Osisko Gold’s 2025 sales and EPS implies an increase of 25.3% and 30.8%, respectively, from a year ago.

DRDGOLD Limited DRD currently carries a Zacks Rank of 2. The company’s stock has trended upward 7.2% year to date.

The Zacks Consensus Estimate for DRDGOLD’s fiscal 2025 sales and EPS implies an increase of 33.1% and 29.3%, respectively, from a year ago.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Carpenter Technology Corporation (CRS) : Free Stock Analysis Report

DRDGOLD Limited (DRD) : Free Stock Analysis Report

RPM International Inc. (RPM) : Free Stock Analysis Report

Osisko Gold Royalties Ltd (OR) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research