Quanex (NX) Q2 Earnings Beat Estimates, Affirms Guidance
Quanex Building Products Corporation NX reported second-quarter fiscal 2017 (ended Apr 30, 2017) adjusted earnings per share of 11 cents, a 10% improvement from 10 cents in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of 6 cents.
Including one-time items, the company reported earnings per share of 4 cents in the quarter compared with 11 cents in the year-ago quarter.
Operational Update
Quanex reported revenues of $209.1 million, which dipped 9% year over year. However, revenues beat the Zacks Consensus Estimate of $206 million. Revenues were hurt by the company’s previously disclosed decision to walk away from less profitable business in an effort to protect margins.
Cost of sales during the quarter declined 8% to $162 million from $176 million in the prior-year quarter. Gross profit declined 11% year over year to $47 million while gross margin contracted 60 basis points to 22.5%.
Selling, general and administrative expenses decreased 8% year over year to $26.6 million. Quanex Building reported adjusted operating profit of $7.84 million plunging 25% from $10.4 million in the year-ago quarter.
Adjusted EBITDA went down to $20.5 million for the quarter from $24.3 million in the prior-year quarter affected by lower volumes as it continues to move away from less profitable business as well as higher legal expenses during the quarter.
Quanex Building Products Corporation Price, Consensus and EPS Surprise
Quanex Building Products Corporation Price, Consensus and EPS Surprise | Quanex Building Products Corporation Quote
Financial Update
As of Apr 30, 2017, Quanex had cash and cash equivalents of $14.5 million compared with $26 million as of Oct 31, 2016. The company generated $15.6 million in cash from operating activities in the six-month period ending Apr 30, 2017 compared with $24.6 million in the prior-year period. Long-term debt was $266.4 million as of Apr 30, 2017, compared with $259 million as of Oct 31, 2016.
Quanex’s Board of Directors declared a quarterly cash dividend of 4 cents per share. The dividend will be paid on Jun 30, 2017, to shareholders of record on Jun 15, 2017.
Outlook
Quanex reiterated prior guidance of $880 million to $900 million in revenue and $105 million to $112 million in adjusted EBITDA for 2017.
Quanex has underperformed the Zacks categorized Buildings & Construction Products- Miscellaneous sub industry in the past one year. The company’s shares have gained 5.6%, lagging the industry’s climb of 15.9%.
Houston, TX-based Quanex is a leading manufacturer of engineered materials, components and systems, serving domestic and international window and door original equipment manufacturers, through its Engineered Products and Aluminum Sheet Products Groups.
Quanex currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the construction sector include Masco Corporation MAS, Patrick Industries, Inc. PATK and Armstrong World Industries, Inc. AWI. Masco has a long term estimated earnings growth rate of 16.07% and boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Patrick Industries and Armstrong World Industries both have a long-term estimated earnings growth rate of 10% and carry a Zacks Rank #2 (Buy).
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