RPM International Inc., a major player in the specialty coatings and sealants market, experienced a notable downturn in its stock price on Thursday following the release of its second-quarter fiscal 2026 financial report. Although the company achieved record net sales in this period, key profitability metrics failed to meet analyst expectations, prompting investor concerns.
During the quarter, RPM recorded sales totaling $1.91 billion, reflecting a 3.5% increase compared to the same period last year. This figure, while a company record, fell short of the consensus estimate of $1.928 billion. The sales growth was supported primarily by acquisitions, which contributed 3.4%, and the effects of foreign currency translation, which added 0.6%. However, the company noted an organic sales decline of 0.5%, signaling softness in underlying demand.
RPM attributed the strong overall sales performance to its acquisitions and the engineering solutions it provides for high-performance buildings. Nonetheless, the growth momentum was tempered by reduced demand in the do-it-yourself (DIY) segment, which had a moderating effect on overall sales increases. Furthermore, the company highlighted that several construction market segments experienced deceleration as the quarter progressed. An extended government shutdown was cited as a factor that caused longer lead times in construction projects, thus impacting activity and order flow negatively.
On the profitability front, adjusted earnings before interest and taxes (EBIT) declined by 11.2% year-over-year, reaching $226.6 million for the quarter. RPM explained this contraction as the result of strategic growth investments undertaken during the quarter, diminished benefits from fixed-cost absorption due to lower volumes, and temporary operational inefficiencies related to ongoing consolidation efforts at plants and warehouses. These factors collectively pressured margin expansion despite top-line gains.
Adjusted diluted earnings per share (EPS) were reported at $1.20, marking a 13.7% year-over-year decrease and falling short of the consensus estimate of $1.42. This earnings miss further weighed on investor sentiment during trading.
From a cash flow perspective, RPM generated operating cash flow of $583.2 million and invested $111.8 million in capital expenditures during the first half of fiscal 2026. Total debt as of November 30, 2025, was $2.52 billion, against a liquidity reserve of $1.10 billion. The company also returned $168.7 million to shareholders through dividends and share repurchases over this period.
Analyzing results by geographic regions, Europe led with a robust sales increase of 13.9%, aided by recent acquisitions and positive foreign exchange movements. North American sales rose by 1.9%, driven largely by acquisitions and demand for high-performance building products in the U.S.; however, this was partially offset by softness in the Canadian market. In emerging markets, Africa and the Middle East markets exhibited growth, primarily propelled by infrastructure and high-performance building projects.
Breaking down results by business segments reveals varied performance. The Construction Products Group saw sales growth of 2.4% year-over-year to $737.4 million but witnessed a 10.9% decline in adjusted EBIT to $98.6 million. The Performance Coatings Group achieved revenue growth of 4.4% to $533.8 million, while adjusted EBIT slightly contracted by 0.3% to $82.8 million. The Consumer Group recorded a 4.1% increase in sales to $638.7 million but faced a 6.2% decrease in adjusted EBIT, which amounted to $90.0 million.
In response to the current market environment, RPM has initiated measures aimed at reducing selling, general, and administrative (SG&A) expenses. The company anticipates these efforts will yield approximately $100 million in annualized savings once fully implemented. Expected realizations include about $5 million in the third quarter, followed by an additional $20 million in the fourth quarter of fiscal 2026, culminating in $75 million savings projected for fiscal 2027.
Looking ahead, RPM projects mid-single-digit sales growth for the third quarter alongside an adjusted EBIT increase in the mid- to high-single-digit range. For the fourth quarter, management forecasts similar sales growth with an EBIT improvement ranging from low to high single digits. These projections incorporate the anticipated benefits of ongoing SG&A optimization efforts.
Frank C. Sullivan, RPM's chairman and CEO, commented on the results, emphasizing the influence of strategic growth investments enabling outperformance relative to underlying market trends in the third quarter. However, he also noted that consumer confidence remains subdued and that uncertainties within the construction sector—exacerbated by weather and other factors—continue to hinder demand. Sullivan acknowledged the challenges posed by longer lead times in construction projects resulting from a protracted government shutdown, which, coupled with negative consumer sentiment, led to sales declines in late Q2 and constrained earnings performance.
He further remarked on RPM’s proactive approach, stating that the firm has swiftly implemented SG&A optimization initiatives expected to drive approximately $100 million in annual savings while maintaining focused investments in its highest-potential growth areas. Despite limited visibility heading into the fourth quarter, Sullivan expressed optimism about remaining opportunities arising from activity related to previously delayed construction projects and commended the company's solid construction pipeline.
At the time of reporting, RPM International’s shares were trading down 3.53% at $101.12, reflecting investor caution following the mixed financial outcomes and outlook adjustments.