On the positive side, the company did a good job managing costs and it is still targeting a 540-basis point improvement in operating margin through its "MAP to Growth" initiative. Additionally, in its earnings press release, management commented that it is seeing some relief in terms of raw material costs, which should flow through to its income statement next quarter.
Taking a look at the specific numbers, EPS came in at $0.52, missing the Street's $0.67 expectation by a fairly wide margin. Due to the aforementioned increase in raw material costs, gross margin slipped to 39.5% from 41.9% in the year ago period. Its solid cost management did help to offset this somewhat as Adjusted SG&A expense, as a percentage of revenue, improved by 100 basis points compared to last year. Still, EBIT fell sharply by 27% yr/yr to $96.8 mln.
Moving to the top line, revenue grew by 3.6% yr/yr to $1.36 bln, modestly missing the $1.38 bln consensus. It was also its slowest revenue growth since 3Q17's +3.4% mark. As we mentioned earlier, the company says it was negatively impacted by unfavorable weather in the U.S., but foreign currency translation took a toll as well, hitting the top-line growth rate by 2%. If all that wasn't enough for RPM to content with, international sales in its Industrial Segment (52% of revenue) were also soft during the quarter.
RPM's consumer segment, which includes brands like Rust-Oleum, DAP, and Zinsser, experienced slightly better growth, up 4.1% to $432.6 mln. In this segment, the company was able to push some price increases through, and it also launched some new sealant and adhesive products, helping to mitigate the effects of those aforementioned headwinds.
But overall, based on its disappointing earnings performance over the past few quarters, RPM is clearly facing a challenging environment. The good news, though, is that its "MAP to Growth" operating improvement plan is now well underway, which included closing five manufacturing plants, as well as the implementation of new manufacturing processes, reduction in inventory, and the consolidation of the number of vendors in its system. At the same time, the company plans to return $1.5 bln in capital to stockholders by May 31, 2021, through a combination of dividends and buybacks.
So, while the company is navigating through a turbulent market right now, it does have a plan in place which should be supportive to its stock over the next several quarters.