BMO cuts RPM International stock target on volume trends

On Friday, BMO Capital Markets adjusted its outlook on RPM International Inc. (NYSE:RPM), a company specializing in coatings, sealants, and building materials. The firm lowered its price target on the stock to $123 from the previous $127 while maintaining an Outperform rating.

The rationale behind this adjustment is tied to RPM's financial performance in fiscal year 2024, where the company has demonstrated significant profitability improvements. This has been attributed to better price/cost dynamics and a boost from onshoring trends benefiting RPM's Performance Coatings Group (PCG) and Construction Products Group (CPG).

Despite these positive developments, the company's extensive efforts through its MAP25 initiatives have been somewhat obscured by weaker volume trends in its markets. BMO Capital Markets anticipates that as volume trends are expected to improve over the next 12 months, the results of management's strategies will become more apparent.

The analyst from BMO Capital Markets expressed optimism about RPM's future performance. They predict mid to upper teens earnings per share (EPS) growth for the next two years. Additionally, they anticipate a continued increase in free cash flow (FCF) resulting from the MAP25 initiatives, positioning RPM to potentially outperform in the upcoming period.

As RPM International Inc. (NYSE:RPM) navigates through fiscal year 2024, the company's financial metrics and market performance provide a nuanced picture for investors. According to InvestingPro data, RPM boasts a market capitalization of $14.39 billion and a Price/Earnings (P/E) Ratio of 27.33, indicating a premium valuation in the market. Notably, the company's revenue growth over the last twelve months stands at a modest 1.65%, reflecting the challenging volume trends mentioned by BMO Capital Markets.

InvestingPro Tips suggest that RPM International's dedication to shareholder returns is evident through its significant milestone of raising its dividend for 10 consecutive years and maintaining dividend payments for an impressive 52 consecutive years. Moreover, the company's liquid assets exceed short-term obligations, providing financial stability and reassurance of its ability to meet immediate liabilities. For investors looking for additional insights, there are 12 more InvestingPro Tips available, which can be explored with a subscription. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

While RPM is trading near its 52-week high, with a price percentage of 92.5% of this peak, the company's strong free cash flow yield and consistent profitability over the last twelve months are factors that could attract long-term investors. With the next earnings date set for April 4, 2024, stakeholders will be keenly watching for signs of sustained growth and the impact of the MAP25 initiatives on RPM's overall performance.

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