Quanex to Report Q1 Earnings: What Could Drive the Results?

Quanex Building Products Corporation NX is slated to report first-quarter 2025 results on March 10, after market close.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 15.1% and 0.6%, respectively. On a year-over-year basis, revenues grew 66.6% but earnings per share (EPS) declined 35.8%. The sharp rise was largely due to the acquisition of Tyman, which closed on Aug. 1, 2024. Excluding Tyman’s contribution, revenue would have declined 2.3% for the quarter, reflecting lower organic demand.

The company’s earnings topped the consensus mark in all the trailing four quarters, an average surprise being 23.5%.

Quanex Building Products Corporation Price and EPS Surprise

Quanex Building Products Corporation price-eps-surprise | Quanex Building Products Corporation Quote

How Are Estimates Placed for Quanex Stock?

The Zacks Consensus Estimate for NX’s loss per share has widened to 6 cents from 5 cents over the past 30 days. The estimated figure indicates a decrease from the year-ago profit level of 18 cents per share.

The consensus estimate for revenues is pegged at $381.2 million, indicating a 59.4% increase from the year-earlier level.

Factors That May Influence Quanex’s Quarterly Results

After a transformative fiscal 2024 marked by the Tyman acquisition, record adjusted EBITDA and strategic restructuring, Quanex is bracing for a challenging start to 2025.

Demand is expected to remain sluggish across many of the company’s core markets in the first quarter. The housing sector’s slowdown, high interest rates, and inflationary pressures have continued to restrict new home construction and remodeling activity.

The company expects a seasonally weak first quarter but remains optimistic about a demand recovery in the second half of the fiscal year, fueled by improving consumer confidence, Fed rate cuts, and pent-up housing demand. The combination of high mortgage rates, consumer uncertainty, and the winter slowdown in construction is likely to weigh on results.

For first-quarter 2025, Quanex expects 50% to 52% revenue growth, mainly due to Tyman’s contribution. However, organic sales are expected to be down, reflecting continued weak housing and remodeling demand.

Segment-wise, the Zacks Consensus Estimate for NX’s North American Fenestration segment, which supplies components for windows and doors, is currently pegged at $130 million, depicting a decline from $148 million a year ago. The consensus estimate for the European Fenestration segment is currently pegged at $47 million, indicating a decline from $49 million a year ago. On the NA Cabinet Components side, revenue is expected to decline to $40.8 million from $43.1 million a year ago.

Despite the anticipated decline in volumes, Quanex expects adjusted EBITDA margins to expand by 25 basis points in the first quarter compared to the prior-year quarter.

This margin improvement will be driven by synergies from the Tyman integration. Quanex is already ahead of schedule in realizing cost savings from the acquisition. Efficiencies from corporate office consolidation and exiting low-margin business in China will provide a tailwind. Then, the company is expected to benefit from operational efficiencies. The company is restructuring its operating model, shifting from regional to product-based segments. This is expected to enhance cost management and optimize manufacturing operations. Also, lower raw material costs are expected to act as a tailwind for the EBITDA margin expansion.

Quanex expects interest expense of approximately $15 million in the first quarter, which will likely be the highest level for the year. Management has prioritized deleveraging, having already repaid $53.75 million in debt in the prior reported quarter.

Overall, Quanex is preparing for a muted start to fiscal 2025, with lower volumes weighing on performance. However, margin improvements, debt reduction, and the successful integration of Tyman should help offset some of these headwinds.

What Our Quantitative Model Predicts for NX Stock

Our proven model does not conclusively predict an earnings beat for Quanex this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Quanex currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Gibraltar Industries, Inc.’s ROCK fourth-quarter 2024 adjusted earnings topped the Zacks Consensus Estimate and grew year over year. On the other hand, net sales missed the consensus mark and tumbled year over year.

ROCK’s quarterly bottom-line performance was backed by a favorable mix shift and continued strong operating execution. Although the timing of a large project last year hampered the net sales growth during the quarter, the company is optimistic about the prospects, given the robust public spending trends at the federal and state levels.

Armstrong World Industries, Inc. AWI reported solid results for fourth-quarter 2024, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.

Armstrong World’s growth trend was backed by solid contributions from the Mineral Fiber, as well as Architectural Specialties segments. Growth was attributable to the increase in average unit value (AUV) and volume. Also, contributions from recent acquisitions aided the uptrend.

Masco Corporation’s MAS fourth-quarter 2024 earnings topped the Zacks Consensus Estimate and grew year over year. Earnings topped expectations in six of the trailing seven quarters. On the other hand, net sales missed the consensus mark and tumbled year over year.

Masco’s top-line results reflected lower sales volume for North America’s plumbing products, lower net selling prices of decorative architectural products and an unfavorable sales mix of plumbing products. However, the bottom line was favored by lower selling, general and administrative expenses, favorable net selling prices and strategic cost savings initiatives.

This article originally published on Zacks Investment Research (zacks.com).

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