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What's in the Cards for Quanex (NX) This Earnings Season?

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Quanex Building Products Corporation (NX - Free Report) is scheduled to report second-quarter fiscal 2021 results on Jun 3, after the closing bell.

In the last reported quarter, earnings of Quanex topped the Zacks Consensus Estimate by 1,250% and increased 575% year over year.

Moreover, revenues topped analysts’ expectation by 13.9% and grew 17% from the year-ago period due to solid demand in each of its operating segments.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings has been unchanged over the past 30 days at 34 cents per share. The estimated figure indicates a 79% increase from the year-ago reported earnings of 19 cents per share. The consensus mark for revenues is pegged at $217.5 million, suggesting 16% year-over-year growth.

Factors to Note

Earnings and revenues of the company are expected to have increased in the quarter to be reported, courtesy of higher volumes and improved operating leverage.

Quanex, an industry-leading manufacturer of window and cabinet components sold to original equipment manufacturers, has been performing pretty well of late on the back of strong growth across the markets served. The segments particularly benefited from above-market growth, price increases implemented at 2018-end and improvement in silicone cost for its spacer products.

Quanex — which shares space with Owens Corning Inc. (OC - Free Report) , Masco Corporation (MAS - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) in the Zacks Building Products – Miscellaneous industry — has been recording higher margins in three reportable segments, namely NA Fenestration, EU Fenestration and NA Cabinet Components, reflecting solid pricing actions and lower SG&A. These positives are expected to reflect on fiscal second-quarter results.

As highlighted during the first-quarter earnings call, the company expects net sales to be up 25% year over year for the fiscal second quarter. The company anticipates the strongest revenue growth and margin expansion for the quarter to be reported from the EU Fenestration segment, since its plants in the U.K. were shut down last March and didn't come back online completely until May. Demand in Europe and the U.K. has been strong, owing to persistent shift of discretionary income away from travel and leisure activities into home improvement projects.

However, increased inflationary pressures on most of its key raw material inputs and some large dollar expense items such as freight are likely to have put pressure on margins. Also, severe winter weather in Texas and along the Gulf Coast may have caused delays and shortage of key chemicals, feedstocks as well as energy supply. Also, availability of labor may have been a cause of concern.

What the Zacks Model Unveils

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. This is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 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 #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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