RPM - RPM International: Excellent Economics Well Reflected At Current Prices

2024-06-20 22:16:35 ET

Summary

• Goldman Sachs has increased S&P 500 target to 5600, citing a better earnings outlook and a higher P/E multiple.
• The basic materials sector shows strong fundamentals compared to projected earnings growth.
• RPM International's business prospects and valuation are bright in my view, but current prices reflect this well, and expectations are tremendously high.

Investment Summary

As we enter the halfway point of 2024, positioning for the remainder of the year is now paramount. Goldman Sachs (GS) has increased its S&P 500 index target by 300 basis points for year-end , calling for a 5600 level (400-point increase). David Kostin, the bank's chief equity strategist, noted a better earnings outlook and a higher P/E multiple of 20.4x (19.5x previous).

Figure 1 . Goldman Sachs revised S&P 500 Index scenarios [June 2024]

This optimism provides a solid bedrock for the basic materials sector. It presents attractive fundamentals when comparing (1) its current sector weighting in the S&P 500 Index to (2) its projected earnings growth rates over the next 12 months (Figure 2)....

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