RPM Stock Shrugs Off EPS Miss, Rises on $100M Cost-Cutting Plan
Investors look past a 15% earnings shortfall, focusing instead on a new efficiency program aimed at offsetting slowing consumer demand.
RPM Stock Shows Surprising Resilience After Earnings Miss
MEDINA, Ohio – Shares of RPM International Inc. (NYSE: RPM) demonstrated notable resilience in after-hours trading Thursday, climbing modestly despite the company reporting second-quarter earnings that fell significantly short of Wall Street expectations. The market's surprising reaction suggests investors are prioritizing a newly announced $100 million cost-saving plan over the immediate impact of a slowdown in consumer and construction markets.
The specialty coatings and sealants manufacturer announced fiscal 2026 second-quarter adjusted earnings per share of $1.20, a stark 15% miss compared to the analyst consensus of approximately $1.41. The figure also represents a 13.7% decrease from the same period last year. Revenue, while a record for the quarter at $1.91 billion, was up a modest 3.5% and also fell shy of the anticipated $1.94 billion.
Typically, such a pronounced earnings shortfall would trigger a significant sell-off. However, after closing the regular session at $104.82, RPM shares ticked up to $104.94 in after-hours activity. The muted reaction appears directly tied to the company's proactive response to what its CEO, Frank C. Sullivan, described as a 'slower demand environment' and 'negative consumer sentiment.'
Cost Savings Outweigh Current Weakness
In response to the challenging conditions, RPM is launching an "SG&A-focused optimization" initiative. The plan is designed to generate approximately $100 million in annualized savings once fully implemented, targeting the company's sales, general, and administrative expenses. This decisive action appears to have reassured investors that management is moving quickly to protect margins and profitability.
"While recent market conditions have been challenging, we are taking immediate and substantial actions to align our cost structure with the current demand environment," Sullivan noted in the company's earnings release. This forward-looking strategy, rather than the backward-looking results, captured investors' attention.
The revenue figures, though below estimates, still marked a quarterly record, indicating that RPM is capturing some growth, albeit at a slower pace than analysts had modeled.
Broader Market Context
The company’s performance stands in contrast to a more optimistic outlook for the wider specialty chemicals sector. Industry forecasts for 2026 anticipated global growth of around 3.5%, according to a recent PwC report, signaling that RPM's headwinds may be more specific to its mix of construction and consumer-facing products.
Before the earnings announcement, analysts held a "Moderate Buy" consensus rating on RPM stock, with an average price target of $128.64, according to data from MarketBeat. However, several firms, including Citigroup and UBS, had already trimmed their price targets in late 2025, suggesting some caution was already being priced into the shares.
Moving forward, investors will be closely watching for execution on the cost-saving plan and any signs of stabilization or recovery in its key markets. The market's willingness to look past a difficult quarter and reward proactive management could set a new tone for the company as it navigates the economic landscape of 2026.