Quanex Building Products reported a remarkable increase of 18.70% in its quarterly results, surpassing Wall Street’s expectations and prompting a revision of its full-year forecast, fueled by optimism surrounding its recent acquisition.
Investors responded positively, pushing Quanex’s stock up by 20% by 10:30 a.m. ET.
Impressive Quarter and Upgraded Outlook
Quanex, a producer of diverse building materials such as windows, doors, vinyl fencing, refrigeration, and cabinetry, recently completed a $1.1 billion acquisition of Tyman in the U.K. This strategic move aims to enhance its geographical diversification and expand its expertise in new product lines.
The company’s last complete quarter before the acquisition was exceptionally strong. For the fiscal third quarter ending July 31, Quanex reported earnings of $0.73 per share on a revenue of $280.4 million, exceeding Wall Street’s expectations of $0.70 per share and $278 million in revenue.
Looking ahead, Quanex projects full fiscal year revenue between $1.28 billion and $1.29 billion, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) ranging from $171 million to $176 million. Previously, the forecast was for $1.1 billion in revenue and adjusted EBITDA between $145 million and $150 million.
Is Quanex a Stock Worth Buying?
Despite a 6% year-over-year decline in revenue, indicative of weakened demand from sectors like housing affected by rising interest rates, CEO George Wilson remains optimistic about the future.
“Demand remained soft, but we believe the building products industry will benefit from pent-up demand once interest rates start to trend lower and consumer confidence is restored,” Wilson stated. “Looking ahead, work on integrating the recently acquired Tyman business and creating something new and special within the building products industry is in progress.”
Even with Friday’s stock surge, Quanex shares are still 25% below their peak earlier this year. If Wilson’s predictions hold true and demand picks up, Quanex shares may have significant growth potential.
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