RPM International Inc. Paints Some Pretty Nice Results

By Markets Fool.com

Image source: RPM International.

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The strong U.S. dollar continues to weigh on the revenue of U.S.-based companies that sell their products around the globe. That was clear in RPM International's (NYSE: RPM) fiscal fourth-quarter report, which saw FX gobble up organic growth gains in two of its three segments. That said, the company is fighting against this headwind by going on the offensive and making acquisitions, which drove the bulk of its growth last quarter.

RPM International Inc. results: The raw numbers

Metric

FQ4 2016 Actuals

FQ4 2015 Actuals

Growth (YOY)

Sales

$1.4 billion

$1.4 billion

3.9%

Net Income

$152.9 million

$128.0 million

19.5%

EPS

$1.13

$0.94

20.2%

Data source: RPM International Inc..

What happened with RPM International this quarter?

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Acquisitions played a key role this quarter:

  • Industrial segment sales slipped 0.7% to $686.6 million as foreign exchange weighed on sales growth. Overall, FX negatively impacted sales by 2.8%, more than offsetting a 1.6% increase from organic growth and a 0.5% boost from acquisitions. Industrial earnings, on the other hand, jumped 15.4% to $107.0 million thanks in part to a one-time gain of $8 million as a result of the revaluation of its Chinese joint venture after it acquired the remaining stake in that entity during the quarter.
  • Specialty segment revenue was up 5.1% to $196.2 million, driven largely by a 4.2% boost from acquisitions. Organic growth of 1.7% more than offset a 0.8% impact for foreign currencies. The acquisition-fueled growth drove segment earnings up 20.7% to $32.7 million.
  • The consumer segment's revenue jumped 9.9% to $543.8 million largely because of acquisitions, which added 9.9% to this segment's top line. Meanwhile, organic growth of 1.4% was completely offset by the impact from FX. Earnings, however, jumped 18.2% on an adjusted basis to $107.3 million.

What management had to say

CEO Frank Sullivan,commenting on the company's results, said:

RPM turned in a solid performance for our fourth quarter, especially in light of the headwinds posed by the continuing strong U.S. dollar, slow growth in many international regions and a worldwide recession in the energy and heavy manufacturing segments of the economy.

As Sullivan notes, the company battled several headwinds during the quarter. One of the keys to overcoming these headwinds were the acquisitions it made over the past year. Becuase of its success, the company continued to be active in 2016, acquiring several companies, including the purchase of the rest of its Chinese joint venture. Almost all of these transactions have one thing in common: They'll be accretive to earnings within a year. That focus on finding transactions to boost the bottom line has enabled the company to continue to grow despite the headwinds.

Looking forward

With its fiscal 2016 now in the books, RPM International has issued guidance for its fiscal 2017. The company expects sales growth in a range of 4% to 6%, with its consumer and specialty segments up in the mid-single-digit range while its industrial segment is projected to be up in the low-single-digit range. Meanwhile, it sees earnings growing by 10% to 12%, to a range of $2.68 to $2.78 per share.

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Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends RPM International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.