RPM International's Q2 Fiscal 2026 Results Disappoint: Profitability Pressures Mount Despite Revenue Growth

RPM International Inc. (RPM) faced a challenging second quarter in fiscal 2026 (ended November 30, 2025), with financial performance falling short of Wall Street expectations. While the company managed to post year-over-year revenue increases, earnings fell short on multiple fronts, and operational profitability contracted significantly, raising questions about margin resilience amid persistent cost headwinds.

The Numbers Tell the Story: Where RPM Stumbled

The headline figures revealed the extent of the earnings disappointment. RPM’s adjusted earnings per share came in at $1.20, trailing the Zacks Consensus Estimate of $1.41 by a notable 14.9%. This represented a year-over-year decline from the prior-year quarter’s adjusted EPS of $1.39.

On the revenue side, net sales of $1.91 billion fell 1% short of the $1.93 billion consensus projection, though the company did achieve a 3.5% year-over-year increase. However, the organic sales picture was considerably weaker: the company posted a decline of 0.5% on an organic basis, meaning revenue growth was heavily dependent on acquisitions (which contributed 3.4%) and favorable currency effects (0.6% contribution).

Perhaps most troubling was the deterioration in profitability metrics. Adjusted EBIT—a critical measure of operational performance—declined 11.2% year over year to $226.6 million. The adjusted EBIT margin compressed by 190 basis points to 11.9%, signaling that cost pressures are outpacing revenue gains.

What’s Behind the Margin Squeeze?

Several factors conspired to pressure the company’s bottom line. Selling, General & Administrative expenses, as a percentage of net sales, ticked up 10 basis points to 28.8% from 28.7% in the comparable quarter. More significantly, the company faced headwinds from Mergers and Acquisitions-related costs and temporary inefficiencies stemming from ongoing consolidation of manufacturing and warehouse facilities.

Beyond internal factors, external pressures also weighed on results. DIY demand softened as the quarter progressed, while the extended government shutdown disrupted construction timelines tied to public projects and created longer lead times for project completions. These macroeconomic headwinds proved difficult to overcome even with the company’s strategic investments in high-performance building solutions and acquisitions.

Geographic and Segment Performance: Mixed Signals

A geographical breakdown of sales reveals an uneven recovery. North America, which accounts for approximately 76% of quarterly sales, grew 1.9% year over year, buoyed by acquisitions and strong demand for high-performance building solutions in the U.S., though this was offset by softer Canadian demand. Europe (16% of sales) performed more robustly, with a 13.9% increase driven by M&A activity and favorable currency translation. Sales in Africa and the Middle East (2% of sales) increased 5.2%, supported by infrastructure project demand. Conversely, Latin America (4% of sales) declined 0.2%, while Asia Pacific (2% of sales) fell 3.5%, reflecting broader regional challenges.

Across the three operating segments, the EBIT story was consistently weak:

Construction Products Group saw net sales grow 2.4% to $737.4 million, but adjusted EBIT contracted 10.9% year over year to $98.6 million, with the adjusted EBIT margin compressing 200 basis points to 13.4%.

Performance Coatings Group posted net sales growth of 4.4% to $533.8 million, but adjusted EBIT declined 0.3% to $82.8 million, with adjusted EBIT margin contracting 80 basis points to 15.5%.

Consumer Group achieved net sales growth of 4.1% to $638.7 million, though organic sales actually declined 4.7%. Adjusted EBIT fell 6.2% to $90 million, with adjusted EBIT margin down 150 basis points to 14.1%.

Balance Sheet Stability Amid Operational Challenges

Despite the profitability pressures, RPM maintained a solid liquidity position. Total liquidity stood at $1.1 billion compared with $969.1 million at fiscal 2025’s end. Cash and cash equivalents reached $316.6 million versus $302.1 million a year ago. Long-term debt declined to $2.51 billion from $2.64 billion, suggesting the company is managing its leverage thoughtfully even as it pursues acquisitions.

Management’s Path Forward: Hope Tied to MAP 3.0

Looking beyond the near-term headwinds, management expressed confidence that margins will recover as the MAP 3.0 initiative gains traction. This efficiency program is central to the company’s strategy to offset current cost pressures.

For the fiscal third quarter, RPM projects consolidated sales to increase at a mid-single-digit rate, with adjusted EBIT expected to grow in the mid- to high-single-digit range year over year. The Consumer segment is anticipated to outpace the Performance Coatings and Construction Products segments in growth, supported by recent acquisitions.

The fiscal fourth quarter outlook suggests potential acceleration. Management anticipates that delayed projects should convert into activity by year-end, and if weather-related disruptions shift projects from Q3 to Q4 (as happened last year), much of that activity should materialize in the fourth quarter. Consolidated sales for Q4 are projected to reach mid-single-digit growth compared with prior-year record results, while adjusted EBIT is expected to advance in the low- to high-single-digit range year over year. The company’s repair-and-maintenance focus and engineered systems for high-performance buildings should continue to provide support.

Market Reaction and Investment Perspective

Following the earnings release, RPM shares gained 1.7% during trading hours, suggesting some investor relief despite the disappointing figures. At present, RPM International carries a Zacks Rank #4 (Sell), reflecting the consensus bearish outlook on the stock.

The quarter underscored a fundamental challenge facing RPM: revenue growth proving insufficient to offset mounting operational costs and efficiency challenges. While management’s MAP 3.0 initiative and recent acquisitions offer a potential path to margin improvement, investors will be closely watching whether the company can translate these strategic initiatives into tangible profitability gains in coming quarters.