Quanex Building Products Corporation (NX Quick QuoteNX - Free Report) reported better-than-expected results for the third quarter of fiscal 2024 (ended July 31, 2024) wherein the adjusted earnings and net sales topped the Zacks Consensus Estimate. However, on a year-over-year basis, the bottom and top lines declined.

The quarter’s results reflect a year-over-year decline due to demand softness across the building products industry due to inflated interest rates and low consumer confidence. This downtrend was also reflected in the reduced sales contributions from the reportable segments of Quanex. Furthermore, a decrease in volumes, accompanied by lower operating leverage, pressurized the bottom line and the margins.

Going forward, NX is optimistic about the gains from the recently acquired Tyman business. Also, it aims to capitalize on the existing commercial opportunities and absorb new innovative solutions.

Following the result announcement, NX’s shares jumped 12.3% in the after-hours trading session on Wednesday.

NX’s Q3 Discussion

Quanex reported adjusted earnings of 73 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 4.3%. In the prior-year quarter, it reported adjusted earnings per share of 97 cents.

Net sales of $280.3 million marginally topped the consensus mark of $278 million by 0.8%. The metric declined 6.4% from the prior-year quarter’s level.

NX’s Segmental Details

North American Fenestration: The segment’s net sales declined year over year by 3.9% to $170.3 million, mainly due to lower volumes.

The gross profit margin contracted 20 basis points (bps) to 23.5% from 23.7% in the year-ago period. Adjusted EBITDA margin also contracted year over year to 14.5% from 15.6%.

European Fenestration: The net sales of this segment declined 10.8% (excluding foreign exchange impact) year over year to $59.6 million. The downtrend was due to lower volumes and pricing pressures.

The gross profit margin contracted 110 bps year over year to 38.1%. The adjusted EBITDA margin declined 170 bps year over year to 25.7%.

North American Cabinet Components: Net sales of this segment declined to $51.4 million from $55.4 million reported a year ago, mainly due to lower volumes.

The segmental gross profit margin contracted year over year to 16.6% from 18.9%. The adjusted EBITDA margin contracted 310 bps year over year to 6.6%.

Operating Highlights of Quanex

NX’s gross profit declined to $70.9 million from $78.6 million in the year-ago period. The consolidated gross margin contracted 90 bps year over year to 25.3%.

Selling and administrative expenses increased to $36.5 million from $30.5 million in the prior-year quarter.

Quanex reported an adjusted EBITDA of $42 million, down 13.4% year over year. Adjusted EBITDA margin also declined to 15% from 16.2% in the prior-year period.

NX’s Financials

As of July 31, 2024, Quanex’s cash and cash equivalents were $94 million, up from $58.5 million at fiscal 2023-end. Long-term debt at the end of the fiscal third quarter declined to $51.4 million from $66.4 million at fiscal 2023 end. The current maturities of long-term debt marginally increased to $2.7 million from $2.4 million at fiscal 2023-end.

At the end of the first nine months of fiscal 2024, net cash provided by operating activities was $83.3 million compared with $102.6 million a year ago.

Quanex’s Fiscal 2024 Outlook

NX expects consolidated net sales for the fiscal year to range between $1.275 billion and $1.285 billion compared with the year-ago figure of $1,130.6 billion.

Adjusted EBITDA is expected to be between $171 million and $176 million compared with $159.6 reported in fiscal 2023.

NX’s Zacks Rank & Recent Construction Releases

Quanex currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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