RPM: Elliott Management the Catalyst to Rev Up the "RPMs"
WHY START BUYING NOW
- The transformative agreement with Elliott Management should help boost operating margins from 10.6% in FY18 to an estimated 13.7% in FY20 and could yield upside to RPM’s target (prior to Elliott) of 300 bps of EBIT margin improvement over the next two-to-three years.
- EPS growth is modeled up 10% in FY19 (held back by a higher tax rate and raw material cost headwinds in the first half), accelerating to perhaps 25% for FY20.
- RPM’s revenue is diversified among the Industrial (53% of sales), Consumer (33%) and Specialty (14%) segments, with 60% of revenue from maintenance and repair products.
- RPM's dividend, raised for 44 straight years (only 41 of 19,000 public companies can claim an equal or better record), provides a current yield of 1.9%.
RPM International manufactures, markets and sells various chemical product lines, including paints, infrastructure rehab and repair products, protective coatings, roofing systems, sealants and adhesives. The company's segments include: industrial, which includes maintenance and protection products and services for roofing and waterproofing systems; specialty, which includes industrial cleaners, restoration services equipment, colorants, exterior finishes, edible coatings and other coatings; and consumer, which includes rust-preventative, special purpose and decorative paints, caulks, sealants, primers, nail enamels, cement cleaners, floor sealers and woodcare coatings and other consumer products.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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