RPM Q1 FY2027: Record $2.22B Sales, but Gross Margin Fell a Point

RPM International makes Rust-Oleum paint, DAP caulk, Tremco roofing and Carboline industrial coatings, and it opened fiscal 2027 with a record. Net sales for the three months ended August 31, 2026 rose 4.8% to $2.22 billion, and net income attributable to stockholders rose 12.6% to $256.4 million. The line between those two tells a different story. Cost of sales rose 6.6%, faster than sales, and gross margin fell from 42.3% to 41.3%. Profit still grew faster than sales because overhead fell, and $15.7 million of that fall was a property sale and an earn-out revaluation. The three segments also went three ways. Measured by the company's adjusted EBITDA, one grew 18.2%, one grew 5.5%, and the largest shrank 9.7%.

RPM filed its Form 10-Q on October 6, 2026, the same day as the earnings release. Every figure for the quarter below is from that filing, which is unaudited as all quarterly reports are. Fiscal 2022 through fiscal 2026 come from the audited Form 10-K for each year. RPM's fiscal year ends May 31.

The Headline Numbers​

Start with gross profit. Sales grew $101.9 million and gross profit grew $20.7 million. So about 20 cents of each added sales dollar reached gross profit, against a 42.3% rate on last year's book. The 10-Q gives the cause in one sentence: the decrease "was driven by cost inflation, inclusive of the net tariff-related impacts, and warranty expenses, partially offset by improved pricing to recover inflation and our MAP 2025 initiatives." MAP 2025 is the company's margin improvement program.

Now look at how income before taxes still rose $39.0 million. Gross profit supplied $20.7 million of it. Selling, general and administrative expenses fell $13.8 million. Restructuring fell $3.7 million and interest expense fell $3.8 million. Investment income went the other way, down $5.9 million.

The overhead line needs a second look. The 10-Q says the decrease in SG&A included "a $10.8 million net gain on the sale of a Consumer property that was closed as part of our MAP 2025 program" and "a $4.9 million gain on a fair value adjustment of the earnout liability." Both are credits booked inside SG&A. Together they are $15.7 million. By our arithmetic, without them SG&A would have been $575.5 million, up 0.3%, and income before taxes would have been $321.4 million, up 7.8% and not 13.1%.

That is why the company's own adjusted EBITDA rose only 4.5%. It strips both gains out. It is the more honest growth rate for the quarter, and it is slightly below the growth in sales.

Revenue Deep Dive​

RPM reports three segments. It moved to three from four at the start of fiscal 2026, and on June 1, 2026 it shifted about $143 million of annual Latin American revenue into the Performance Coatings Group. The prior-year column below is as recast by the company.

Construction Products Group is the largest segment at 39% of sales: roofing, sealants, concrete admixtures and waterproofing. Sales rose 0.8%, but only because of acquisitions. Organic sales fell 1.7%. The release blames "delayed sales resulting from a slowdown in the healthcare and education markets, as well as supplier raw material availability issues affecting certain products." Adjusted EBITDA fell $17.8 million. The release lists the causes: lower fixed-cost absorption on reduced volumes, raw material inflation, a $4.4 million increase in bad debt expense from a customer bankruptcy, and a $6.3 million warranty charge at a small European business under review for closure. Segment margin dropped from 21.6% to 19.3%.

Performance Coatings Group carried the quarter. It sells industrial flooring, corrosion-control coatings, fireproofing and food coatings. Sales rose 10.2%, of which 7.9% was organic. Adjusted EBITDA rose $18.7 million and the margin moved from 17.9% to 19.2%. The release credits "higher volumes resulting in improved fixed-cost leverage." This is the same mechanism as in construction, running in the opposite direction.

Consumer Group is the paint aisle and the cleaning shelf. Sales rose 5.3%, nearly all organic. Income before taxes rose 21.5%, but that figure includes the $10.8 million property gain. Adjusted EBITDA, which excludes it, rose 5.5%. By our arithmetic, segment income before taxes without the gain rose 11.7%.

We read the release and the 10-Q for the seven demand and supply themes we track in every earnings post. We did not read the call transcript, and nothing here is quoted from one. What the two documents say:

• Robust demand. Present, but only for part of the company. The release says emerging-market revenue growth above 20% was "fueled by strong demand for engineered solutions used in high-performance buildings and infrastructure projects", and the outlook cites "good end-market demand" for Performance Coatings. The same paragraph says "CPG demand remains soft."
• Market expansion. "Geographically, all emerging market regions generated revenue increases above 20%." The release ties this to "the continued expansion of RPM's Platform model, which leverages shared regional resources to accelerate growth and improve efficiency." It does not say the expansion is ahead of plan.
• New products. One mention. Consumer sales "were aided by shelf space wins, new product introductions and pricing to offset inflation." No product is named and no sell-through figure is given.
• Selling prices. Present in every segment, and always in the same form: "pricing to offset inflation." We come back to this under margins.
• Tight supply. Present, but on the wrong side of the table. The supply that is tight is RPM's own raw materials: "supplier raw material availability issues" and "raw material inflation driven by supply shortages." Nothing says RPM's customers are short of RPM's products.

Two themes are absent: demand exceeding supply, and an industry upcycle. The ledger agrees with that reading. Receivables fell 8.6% in the quarter to $1,518.0 million and days sales outstanding were 60.8 against 61.0 a year ago. Inventory rose $81.5 million. A company that was selling everything it could make would show the opposite.

The Margin Story​

RPM's business is seasonal. The 10-K says sales and results are stronger in the first, second and fourth fiscal quarters and lower in the third, which runs December through February. So compare this first quarter with the first quarter a year ago and not with the full years above it.

The annual rows show a company that repaired its gross margin and then stopped. In fiscal 2022 gross margin was 36.3%, and the 10-K for that year blamed "inflation in raw materials, freight and wages." Two years later it was 41.1%. The fiscal 2024 10-K credits "our MAP 2025 initiatives, which resulted in incremental benefits in procurement, manufacturing and commercial excellence", along with "benefits generated from the commodity cycle" and selling price increases. Since then the figure has been 41.4%, 41.4%, and now a first quarter that is a point below last year's.

SG&A went the other way for most of the period. It rose from 26.7% of sales to 29.1%. So of the 5.2 points of gross margin RPM gained from fiscal 2022 to fiscal 2026, about 2.0 points reached income before taxes. This quarter's drop to 25.3% looks like a reversal. Part of it is real: the 10-Q describes SG&A-focused restructuring approved in the third quarter of fiscal 2026, and cites lower commissions and healthcare costs. Part of it is the two gains. Without them the ratio was 26.0% by our arithmetic, still about 1.2 points better than a year ago.

On price versus volume, the documents are consistent and limited. Every reference to pricing is paired with inflation: "pricing to offset inflation", "pricing actions in response to inflation", "improved pricing to recover inflation." RPM does not disclose a price index. The 10-Q footnotes its organic growth figure with "includes the impact of price and volume" and does not split the two. What the gross margin line shows is the outcome: this quarter, price did not fully cover cost. Management expects that to continue. The outlook says "MAP benefits and selling price increases will help to offset gross margin pressure from higher inflation and start-up costs at new facilities", and the 10-Q adds that the inflationary headwinds "will be reflected in our results throughout fiscal 2027."

The One Big Question: Is This One Company or Three?​

RPM is a holding company for coatings and building-materials businesses that share little beyond chemistry and a parent. The quarter makes that visible. One segment's adjusted EBITDA rose 18.2%, one rose 5.5%, and one fell 9.7%. The total rose 4.5%.

The bull reading is that this is what a portfolio is for. Hospitals and schools delayed roofing work, industrial and infrastructure projects in emerging markets did not, and the homeowner kept buying spray paint. The consolidated margin barely moved: 18.3% against 18.4%.

The bear reading is in the guidance. Management kept its full-year sales outlook inside the old range and lowered its profit outlook.

Under the previous outlook, management expected adjusted EBITDA to grow faster than sales. Now it expects the two to grow at about the same rate. That is the gross margin pressure, carried forward for a full year. For the second quarter, the release projects construction sales up in the low single digits and says segment trends "are expected to be similar to those in the first." It also says: "We also anticipate that CPG will return to positive organic growth by the end of the year." The chief executive's statement calls the construction weakness "a temporary slowdown." The filings cannot confirm "temporary" yet. They can only show the first quarter of it.

It helps to set RPM beside the two other industrial companies in this series, using each one's latest reported period.

The periods differ, so read this for shape and not for rank. Cintas rents uniforms on fixed routes and has raised gross margin about a point a year for five years. Acuity makes lighting and building controls and reached a 50.6% gross margin partly on tariff refunds. RPM sells a physical product made from resins, solvents and pigments, and its gross margin sits ten points below both. When raw materials rise, RPM feels it first. That is the structural reason "pricing to offset inflation" appears in every paragraph of its release.

Tracking a $7.9B Coatings Company in Plain Text​

A press release leads with the record. Double-entry bookkeeping makes every line sit next to the others, so the cost line that grew faster than sales cannot be skipped. The conventions are the ones we use for every company in this series: how we model every company. Income postings are credits (negative), expenses are debits (positive), and Equity:Adjustments takes net income so the transaction sums to zero while the balance assertions pin retained earnings. RPM files in thousands, so the ledger keeps three decimals of MUSD and every figure equals the filed one.

; Check: −2,215.593 + 1,301.631 + 559.768 + 5.157 + 25.535 + −7.518 + −6.033 + 0.269 + 80.427 + 256.357 = 0 ✓
2026-08-31 * "RPM International Inc." "FY2027Q1 Income Statement"
  Income:Revenue                              -2215.593 MUSD  ; net sales: CPG 859,209 + PCG 629,650 + Consumer 726,734
  Expenses:CostOfRevenue                       1301.631 MUSD  ; cost of sales
  Expenses:SellingGeneralAdministrative         559.768 MUSD  ; selling, general and administrative expenses
  Expenses:SellingGeneralAdministrative           5.157 MUSD  ; restructuring expense — the filing's own separate line
  Expenses:OtherNet                              25.535 MUSD  ; interest expense
  Expenses:OtherNet                              -7.518 MUSD  ; investment (income), net
  Expenses:OtherNet                              -6.033 MUSD  ; other (income), net
  Expenses:OtherNet                               0.269 MUSD  ; net income attributable to noncontrolling interests, deducted as the filing does
  Expenses:IncomeTax                             80.427 MUSD  ; provision for income taxes
  Equity:Adjustments                            256.357 MUSD  ; net income attributable to RPM International Inc. stockholders offset (RE set by balance assertion)

Three things are worth noticing. Revenue is one posting, and the three segments are in its comment. They never become sub-accounts, so this ledger can be compared line for line with any other in the series. Restructuring is a second, labeled posting on the SG&A account, because the filing prints it on its own line. And the $0.3 million that belongs to noncontrolling interests is deducted the way the filing deducts it, so the last line is the $256.4 million attributable to RPM's stockholders, the figure behind earnings per share.

What the ledger cannot show is the $15.7 million of gains inside the $559.8 million SG&A posting. The income statement does not print them. They are disclosed in the 10-Q's discussion, and we kept the filed line whole.

Three balance-sheet lines carry the rest of the quarter:

2026-05-31 balance Assets:Current:Inventory                             1058.911 MUSD  ; inventories
2026-08-31 balance Assets:Current:Inventory                             1140.432 MUSD  ; inventories
2026-05-31 balance Liabilities:NonCurrent:LongTermDebt                 -2125.690 MUSD  ; long-term debt, less current maturities
2026-08-31 balance Liabilities:NonCurrent:LongTermDebt                 -1999.028 MUSD  ; long-term debt, less current maturities
2026-08-31 balance Liabilities:Current:ShortTermDebt                    -407.497 MUSD  ; current portion of long-term debt

Inventory rose $81.5 million in three months, or 7.7%. The 10-Q attributes the extra cash tied up to "cost inflation", and reports days of inventory at 76.2 against 78.2 a year ago. So RPM is not holding more product. It is holding the same product at a higher cost. That is the gross margin story appearing on the balance sheet before it finishes passing through cost of sales.

Long-term debt fell $126.7 million. Total debt was $2.41 billion against $2.67 billion a year earlier. The current portion of $407.5 million is mostly the $400.0 million of 3.75% notes due March 15, 2027, so a refinancing or repayment falls inside this fiscal year. Operating cash flow of $263.9 million covered capital expenditures of $58.5 million, dividends of $68.1 million and share repurchases of $22.4 million with room to pay down debt.

Retained earnings give a clean check. The balance moved from $3,583.5 million to $3,771.7 million, an increase of $188.3 million. Net income attributable to stockholders was $256.4 million. The difference is $68.1 million, which is exactly the cash dividends on the cash flow statement. The ledger never records the dividend as a transaction. It falls out of two balance assertions and one income statement.

The Multi-Year Arc​

Net sales grew 17.2% from fiscal 2022 to fiscal 2026, or 4.1% a year. Net income attributable to stockholders grew 34.6%, or 7.7% a year. Gross profit grew 33.9% over the same period. The earnings growth was a margin story and only modestly a sales story.

The inventory column is the clearest picture of what MAP 2025 did. In fiscal 2022, with supply chains broken, RPM built inventory to $1,212.6 million and operating cash flow collapsed to $178.7 million on $491.5 million of earnings. Over the next two years inventory came down by $256.2 million while sales rose, and operating cash flow reached $1,122.3 million in fiscal 2024. Debt fell by $559.5 million in the same two years.

Then the cash went to acquisitions. RPM spent $595.8 million on businesses in fiscal 2025 and $202.4 million in fiscal 2026. Goodwill and other intangible assets rose from $1,821.9 million at May 31, 2024 to $2,512.8 million at May 31, 2026. Debt went back up to $2,646.6 million and is now being paid down again. Acquisitions added 1.6 points of this quarter's 4.8% sales growth.

One year in the net income column is misleading, and the ledger marks it. Fiscal 2025's provision for income taxes was $102.4 million, an effective rate of 12.9%. Note H of that year's 10-K lists a $43.9 million "deferred tax adjustment to U.S. foreign tax credit carryforwards." The ledger records it as its own labeled posting. By our arithmetic, without it fiscal 2025 net income would have been $644.8 million, and fiscal 2026 would show growth of 2.6% where the reported figures show a decline of 4.0%. Income before taxes rose 9.8% in fiscal 2026.

The Verdict: Bull vs. Bear​

Bull Case

• Performance Coatings grew organic sales 7.9% and adjusted EBITDA 18.2%, with its margin up from 17.9% to 19.2%, and management guides the segment to mid- to high-single-digit sales growth next quarter.
• Emerging-market revenue grew more than 20% in every region, which the release attributes to "strong demand for engineered solutions" in buildings and infrastructure.
• Operating cash flow rose to $263.9 million from $237.5 million, and total debt fell to $2.41 billion from $2.67 billion a year ago. The 10-Q reports a net leverage ratio of 1.59 against a covenant limit of 3.75.
• Gross margin was 41.1%, 41.4% and 41.4% in the last three fiscal years after 36.3% in fiscal 2022, so the MAP 2025 gains in procurement and manufacturing have not been given back.
• Even without the two gains, SG&A fell from 27.1% of sales to 26.0% by our arithmetic, which suggests the restructuring begun in fiscal 2026 is reaching the income statement.

Bear Case

• Gross margin fell a full point while sales set a record. Only about 20 cents of each added sales dollar reached gross profit, and the 10-Q says the inflation behind it will last "throughout fiscal 2027."
• Of the $39.0 million increase in income before taxes, $15.7 million was a property gain and an earn-out revaluation credited to SG&A. Adjusted EBITDA, which excludes them, grew 4.5%, slower than sales.
• The largest segment shrank organically by 1.7% and lost 2.3 points of margin. The release calls this "a temporary slowdown", and one quarter of data cannot support the word "temporary."
• Management lowered its adjusted EBITDA outlook from growth of 5% to 10% to the mid-single-digit range, one quarter into the year.
• The release contains no claim that demand exceeds supply and no claim of an industry upcycle. Every mention of pricing is "to offset inflation." The supply shortages it describes are in RPM's inputs, which is a cost, where a shortage of RPM's own products would have been pricing power.
• $407.5 million of debt is current, and inventory rose $81.5 million in the quarter on cost alone.

Our Take. We think the record is real and the quality of the quarter is ordinary. RPM grew sales 4.8% and its own measure of operating profit 4.5%. The 12.6% growth in net income came from a property sale, an accounting revaluation, lower interest and lower restructuring, and none of those repeat on demand. The work RPM did from fiscal 2022 to fiscal 2024 was real: five points of gross margin and $256 million out of inventory. What the last two fiscal years show is that the gain has been held and not extended, and this quarter it slipped. The line to watch is Expenses:CostOfRevenue as a share of Income:Revenue. It was 57.7% a year ago and 58.7% now. If selling prices catch up with resin, pigment and tariff costs, it falls back below 58% by the third quarter and the construction slowdown is the only open question. If it does not, the full-year outlook that was just trimmed is still too high.