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Soaring Earnings Estimates Signal Upside for RPM International (RPM) Shares

Investors may want to bet on RPM International (RPM) as earnings estimates for this company have shown a solid improvement lately. The stock has already built up strong price momentum in the short term, and this trend may continue with its earnings outlook improving further.

The upward trend in estimate revisions, the result of growing analyst optimism about the specialty chemicals company’s earnings outlook, should be reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements. This idea is at the heart of our stock rating tool – the Zacks Ranking.

The five-tier Zacks Rank system, which ranges from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally audited track record of outperformanceZacks #1 ranked stock generating an average annual return of +25% since 2008.

For RPM International, there was strong agreement among analysts covering to raise earnings estimates, which helped push consensus estimates significantly higher for the next quarter and full year.

The chart below shows the evolution of the Zacks Consensus forward EPS estimate over 12 months:

12 month EPS

Revisions to current quarter estimates

The company is expected to earn $1.10 per share for the current quarter, representing a year-over-year change of +39.24%.

Over the past 30 days, the Zacks consensus estimate for RPM International has risen 6.9% as two estimates have risen relative to no negative revisions.

Revisions to estimates for the current year

For the full year, the company is expected to earn $4.60 per share, representing a year-over-year change of +25.68%.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for RPM International. Over the past month, four estimates have risen from no negative revisions, allowing the consensus estimate to rise 7.35%.

Favorable ranking of Zacks

Promising estimate revisions helped RPM International earn a Zacks #1 (Strong Buy) rating. The Zacks Ranking is a proven scoring tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Conclusion

Shares of RPM International are up 9.8% in the past four weeks, suggesting investors are betting on its impressive estimate revisions. You may therefore consider adding it to your portfolio immediately to take advantage of its earnings growth prospects.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.