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Quanex Building Q4 Earnings & Sales Miss, Shares Fall - Analyst Blog

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Shares of Quanex Building Products Corporation ( NX ) tumbled over 8% and closed at $18.31 on Dec 12, after the company released its fourth-quarter and fiscal 2014 (ended Oct 31, 2014) results. Adjusted earnings per share in the reported quarter improved to 8 cents from a loss of 9 cents in the year-ago quarter. However, earnings fell short of the Zacks Consensus Estimate of 20 cents.

Adjusted loss in the year-ago quarter excluded ERP expenses of 9 cents per share; however, the reported quarter had no such adjustments. On a reported basis, earnings were 8 cents per share in the quarter versus a loss of 15 cents in the year-ago quarter.

Quanex Building Products Corporation - Earnings Surprise | FindTheBest

Operational Update

Quanex Building reported revenues of $164 million, declining 2% year over year due to lower sales across all products, as customer orders slowed in an effort to reduce their inventory levels because of winter. Revenues also missed the Zacks Consensus Estimate of $173 million.

Cost of sales during the quarter increased to $129 million from $125 million in the prior-year quarter. However, gross profit declined 17.5% year over year to $34.8 million. Consequently, gross margin contracted 400 basis points to 21%.

Selling, general and administrative expenses decreased 11.6% year over year to $21.2 million. Quanex Building reported an operating income of $5.3 million against an operating loss of $8.6 million (including onetime items) in the year-ago quarter. Excluding one-time items, the company posted an operating income of $5.6 million versus a loss of $5.4 million in the prior-year quarter.

Financial Update

Cash and cash equivalents were at $120.4 million at the end of fourth-quarter fiscal 2014 versus $49.7 million at the end of the year-ago quarter. The company generated $20.8 million in cash from operating activities for the period of twelve months ended Oct 31, 2014 compared with $43.5 million for the period of twelve months ended Oct 31, 2013. Long-term debt decreased to $0.6 million as of Oct 31, 2014 compared with $0.7 million as of Oct 31, 2013.

On Dec 4, 2014, the company declared a quarterly cash dividend of 4 cents per share, payable on Dec 29, 2014, to shareholders of record on Dec 15, 2014. On Sep 5, 2014, Quanex Building also authorized a $75 million share repurchase program. During the fiscal, the company repurchased 1,316,326 shares at an average cost of $242 million.

Fiscal 2014 Performance

For 2014, Quanex Building reported adjusted earnings per share of 20 cents, contrary to a loss of 12 cents in 2013. However, the results missed the Zacks Consensus Estimate of 34 cents. Earnings on a reported basis were 22 cents per share in 2014 versus a loss of 34 cents in 2013.

Revenues for 2014 increased 7.3% year over year to $595 million, however, it the Zacks Consensus Estimate of $605 million.

Guidance

For fiscal 2015, Quanex Building provided its revenue growth guidance in the range of 5% to 7%, with a recovery in the second half of the year in vinyl profile business, leading to full-year earnings before interest, taxes, depreciation and amortization (EBITDA) to range of $57 to $63 million. Additionally, the company has projected capital expenditures of $35 million in 2015, of which $20 million will go into the vinyl profile business. Depreciation and amortization are expected to be $36 million.

Quanex Building expects revenues, without any acquisitions, to be in the band of $825 to $875 million and EBITDA (inclusive of corporate expenses) to be in $115 million to $130 million range for fiscal 2015.

For fiscal 2015, Quanex Building anticipates a slow start, with sluggish growth through winter, coupled with a continued drag on earnings from its vinyl business during the first half of 2015. As such, first-quarter 2015 is expected to be at breakeven EBITDA on flat sales.

The company also believes that the housing recovery will follow a steady path of mid to high single digit growth rates over an extended period of four to five years. In addition, the company guided that U.S. window shipments will be in a mid-cycle level of approximately 65 million units driven by the combination of increased housing starts and a recovery in the remodel and replacement market.

Further, the company remains confident that the vinyl business will return to more normalized levels as it exits 2015 and enters 2016. This is, therefore, expected to contribute positively to Quanex Building's long-term goal of 14% to 15% total company EBITDA margins.

Houston, TX-based Quanex Building Products Corporation is a leading manufacturer of engineered materials, components and systems, serving domestic and international window and door original equipment manufacturers (OEMs), through its Engineered Products and Aluminum Sheet Products Groups.

Quanex Building currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include CaesarStone Sdot-Yam Ltd. ( CSTE ), Graña y Montero SAA ( GRAM ) and Headwaters Incorporated ( HW ). All these stocks carry a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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