RPM's Record Quarter Came With a 9-11% Inflation Bill
Records on the top line, a raised raw-material forecast underneath — and a consumer business that finally grew without any help from demand
RPM · Earnings Call · 2026-10-06
Record quarter, revised math
RPM's fiscal first quarter was, by the numbers on the page, its best ever: record sales, record adjusted EBITDA, and adjusted EPS of $1.98, up 5.3% year over year. “Our associates delivered record first quarter sales adjusted EBITDA and adjusted EPS despite sluggish end markets and several temporary operating headwinds.” — Frank C. Sullivan, Chair and CEO · 2026-10-06
Then the fine print did what fine print does. Management raised its raw-material inflation forecast for the current quarter to 9-11%, up from 6-8% only three months ago, and trimmed the full-year range to mid-single-digit sales and EBITDA growth from a prior 3-7% and 5-10%.
Inflation expectations have increased since we held our last earnings call on July 22... We now expect second quarter inflation will be in the 9% to 11% range up from our previous estimate of 6% to 8%.
The culprits are the market's culprits: High oil, the Middle East impacting supply of polyurethane feedstocks, and freight surcharges now being layered onto customers across most of the portfolio. None of this is new to RPM — the same fog has rolled in for several quarters. Back in April, Sullivan told analysts “the simple answer is we don't know... mid- to high single-digit impact in Q1. Beyond that, we don't know.” — Frank Sullivan, Chairman and Chief Executive Officer · 2026-04-08 What is new is the magnitude of the current-quarter number — from 1-2% a year ago to near double digits now.
RPM's answer is unchanged: cover inflation dollar-for-dollar, add price (2% in Q1, guided to 2.5-3.5% in Q2), and win the margin back later. Gross margin gross margin slipped roughly 100bps in the quarter, but management still keeps its 42% target "in line of sight."
The consumer turn nobody wants to call a turn
The genuinely company-unique positive: Consumer posted 5.2% organic growth, its first positive unit volumes "in a number of quarters." The drivers were shelf space wins, new products, and improving results at Pink Stuff and the cleaners category — self-help, not demand. Sullivan could not have been clearer that the macro is still miserable: “the underlying dynamics quite candidly are not getting better consumer takeaway and foot traffic in major retail customers of ours is still sluggish. The housing market and housing turnover is not getting better... We had positive unit volume growth and positive organic growth in consumer for the first time in a number of quarters.” — Frank C. Sullivan, Chair and CEO · 2026-10-06
The contrast with July is the story. Three months ago management was still praying for a bottom: “it does feel like after two years of a pretty steady single-digit negative declines in consumer takeaway and volume impact, that we're hitting bottom.” — Frank Sullivan, Chair and CEO · 2026-07-22 They never got the rebound in demand — they engineered one. For a franchise whose Rust-Oleum arm is levered to housing turnover at 40-year lows, an internally generated turn is a materially different quality of growth than a cyclical one.
Emerging markets and a quiet fix-or-exit
The Platform Group is the most under-appreciated engine here. “As recently as 5 years ago, the Southern Hemisphere developing world was slightly less than 5% of our consolidated sales. In the first quarter, it was 8%... we have been growing for, almost 2 years at a high double digit rate.” — Frank C. Sullivan, Chair and CEO · 2026-10-06 Management explicitly said this gives it more confidence to buy in those markets — a fresh capital-allocation signal, and one that pairs with an M&A market where the private-equity bid has evaporated. “you are seeing multiples in the M&A environment down by 2 or 3 points my opinion, principally because PE is not as competitive a factor in m and a activity today.” — Frank C. Sullivan, Chair and CEO · 2026-10-06
Meanwhile, the warranty charge that dinged CPG's profitability is quietly a strategy story. Sullivan tied it to “a specific business unit of the Construction Products Group in Europe... an element of a likely closure of that business unit... fix or exit items.” — Frank C. Sullivan, Chair and CEO · 2026-10-06 A "fix or exit" lens is new framing. Note what went quiet: data centers, a top-four company theme as recently as last quarter, barely registered this time. Onshoring and data-center buildout came up only when an analyst prompted them.
Capital, and the tape that disagrees
The balance sheet is the bull case's backbone. Debt-to-EBITDA has fallen below 2.0x from 3.0+, with roughly $1B of liquidity, and interest coverage interest coverage sits near 10.7x. That funded a buyback now running at $25M per quarter and rising — repurchases repurchases up 43% year over year — and Sullivan all but promised more: “given where our stock price is, I certainly would expect us to see a continuation of current levels, if not higher.” — Frank C. Sullivan, Chair and CEO · 2026-10-06 A board-authorized increase and a 53rd consecutive dividend hike complete the shareholder-return picture.
But the tape is voting differently. RPM is down 6.6% over 90 days and nearly 30% from its late-2024 peak, with price-to-revenue price-to-revenue at 1.8x, down 6% year over year. The market is pricing the inflation bite and the CPG softness, not the record quarter.
The rebuttal lands on November 9, when RPM hosts its Investor Day and unveils MAP 2030 — the next chapter of a playbook that has promised 16% EBIT margins since 2018 and still has not delivered. Operating margin operating margin has crept to roughly 13%. That is the recurring RPM tension: genuinely improving operations, a stock that keeps waiting, and a strategic plan that keeps arriving next quarter.