Investopedia: Waiting For Housing To Recover, Valspar's Recovery Already Arrived

Data on the residential housing market has been getting better. Prices and sales activity have both improved, and data from the major big-box home improvement stores Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) suggests that homeowners and contractors are back at work fixing up properties.

While the aforementioned data has been incremental, many housing-related stocks have already posted strong runs. One of them, paint and coatings manufacturer Valspar (NYSE:VAL) is already up 75% over the last two years and about 46% over the past year. While declining TiO2 prices and improving demand should both help results, as will a growing presence in emerging markets, the stock seems to already be testing the high end of its typical valuation range.

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Investopedia: A Much Better PPG, But Not Cheap

Many chemical companies, including Huntsman (NYSE:HUN), are trying hard to divest commodity businesses in favor of higher-margin and more consistent specialty or differentiated product lines. With an upcoming transaction with Georgia Gulf (NYSE:GGC) that will see it shed its commodity chlor-alkali business, PPG (NYSE:PPG) is taking another strong step in that direction. Although PPG's strong share in specialty coatings and growth potential in areas such as optical and specialty materials are quite attractive, the stock's strong performance this year seems to discount a lot of this already.

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Investopedia: Costs Taking Their Toll On RPM International

Much is made of the weak construction markets in North America and Western Europe when talking about specialty chemicals maker RPM International (NYSE:RPM), but that's only part of the story - and maybe not even the most important part. Although strong revenue growth is a goal of most companies, RPM arguably has a more clear and present danger in the form of rising input costs and limited pricing power. Although RPM is a fine company in many respects, valuation still doesn't point to this name as a must-own.

A Fair Fiscal Second Quarter  
RPM International's second quarter was alright, but with a few worrisome trends. Reported revenue did rise almost 11%, with about one-quarter of that growth coming from acquisitions. The industrial segment is still more than two-thirds of sales and revenue growth was a bit light here - up about 10% as reported, but about 40% of that growth was acquisition-related. Volume rose a bit more than 3%, with prices up about a similar amount. Consumer sales were stronger - up more than 12% on a better than 9% rise in volume. (For related reading on acquisitions, see Biggest Merger and Acquisition Disasters.)

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http://stocks.investopedia.com/stock-analysis/2012/Costs-Taking-Their-Toll-On-RPM-International-RPM-DD-PPG-HD0109.aspx

Investopedia: RPM Still Rolling Ahead

The construction industry is still in lousy shape, whether an investor looks at the residential or commercial segments. That makes RPM International's (NYSE:RPM) performance all the more interesting; although volume is not strong, it is positive and the company seems to be holding its own despite no real tailwinds to help it along.

Beginning the Fiscal Year on a Good Note  
RPM managed to get off to a good start for the fiscal year. Revenue rose more than 10% and the company surpassed the high end of the analyst estimate range. Top-line performance was balanced in terms of growth; the consumer business saw sales up 9% while industrial revenue rose almost 11%.

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http://stocks.investopedia.com/stock-analysis/2011/RPM-Still-Rolling-Ahead-RPM-SHW-VAL-LOW-KRA-AKOZY-PPG1005.aspx

Investopedia: RPM Still has Some Horsepower

If a company can do alright in the midst of a terrible end-user market, it stands to reason that the company should do pretty well when the eventual recovery comes. That could well be the thesis for investors looking at RPM International (NYSE:RPM) these days. While the residential real estate market has been a disaster recently, and the commercial market has not exactly been muscular, the company has continued to produce free cash flow. With a bevy of well-known brands, this should be a company in line to benefit from an eventual real estate and construction rebound. 

The Quarter That Was 
Although things might get better someday, that day has not come yet. Sales were up 5% on a pro forma basis, with all of the growth coming from the company's industrial business. Industrial sales climbed about 8%, with more than half of that growth from organic improvement. By comparison, the consumer segment declined about 0.6%, with organic "growth" down more than 1%. For the company's fiscal second quarter, industrial was more than 70% of the company's sale base.

In point of fact, 5% growth actually compares pretty well to the company's historical average revenue growth rate, so investors really do not see the impact of a bad market environment until they get to the profits. Gross profit rose about 1.5% this quarter (and gross margin fell about 150 basis points), while consolidated EBIT increased a bit less than 3%.

The problem here is not that management decided to give themselves big raises or install gold-plated toilets. Rather, the issue is input costs. Companies like Dow (NYSE:DOW), DuPont (NYSE:DD), and BASF have not exactly been dropping prices lately, and RPM really does not have the leverage to push price increases through into the end-user market (particularly in the consumer segment). There's not much for the company to do, then, but eat some of those costs. (For more, see Analzying Operating Margins.)

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Recovery? Specialty Chemicals Lead The Way

Although consumers are not necessarily feeling much better yet, the recovery in the industrial side of the economy seems to be real. Over the last week or so, we have seen several large industrial concerns report strong earnings and cautiously optimistic guidance. Turning to one of the basic feed stocks of industry, specialty chemicals, we see a similar trend at work. Let's take a look at some of the top-performing
companies in this sector.

Albemarle
Albemarle (NYSE:ALB) is mostly a niche producer of specialty chemicals, but do not be fooled into thinking that "niche" is somehow a bad word. Albemarle is a leading producer of refinery catalysts, fire retardants and pharmaceutical inputs and those can be lucrative segments.

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http://stocks.investopedia.com/stock-analysis/2010/Specialty-Chemicals-Looking-Special-ALB-RPM-HXL-CYT-DD-DOW-BA0728.aspx.