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Quanex Building (NX) Q2 Earnings & Revenues In Line, Up Y/Y

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Quanex Building Products Corporation (NX - Free Report) reported second-quarter fiscal 2018 (ended Apr 30, 2018) adjusted earnings per share of 14 cents, which came in line with the Zacks Consensus Estimate. However, the bottom line improved 27% from the year-ago quarter,.
 
Including one-time items, the company reported earnings per share of 12 cents in the quarter compared with 4 cents reported in the year-ago quarter.
 
Operational Update
 
Quanex Building reported revenues of $214 million in the reported quarter, which rose 2% year over year. Revenues also matched the Zacks Consensus Estimate. Growth in new products as well as price increases enacted to combat raw material inflation and a favorable foreign exchange impact led to the year-over-year improvement.
 
Quanex Building Products Corporation Price, Consensus and EPS Surprise

Quanex Building Products Corporation Price, Consensus and EPS Surprise

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

Cost of sales during the reported quarter increased 4% to $169 million from $162 million in the prior-year quarter. Gross profit dipped 3% year over year to $45 million and gross margin contracted 130 basis points to 21.2%.

Selling, general and administrative expenses dropped 12% year over year to $24 million. Quanex Building reported adjusted operating profit of $8.4 million, up 47% from $5.7 million recorded in the year-ago quarter. Adjusted EBITDA went up to $21.7 million for the quarter from $20.5 million witnessed in the prior-year quarter.

Financial Update

Quanex Building reported cash and cash equivalents of $10.1 million at the end of fiscal second quarter 2018 compared with $17.5 million at the end of fiscal 2016. The company generated $21.6 million in cash from operating activities in the first half of fiscal 2018 compared with $16.7 million recorded in the prior-year comparable period. Long-term debt was $211 million as of Apr 31, 2018, compared with $218 million as of Oct 31, 2017.
 
Guidance
 
In fiscal 2018, Quanex Building expects to generate net sales in the range of $890-$900 million. Adjusted EBITDA is estimated to lie in the band of $103-$108 million. Price increases implemented toward the end of the second quarter will help offset inflationary costs in the second half. This along with continued improvements in operating efficiencies will lead to margin expansion in the fourth quarter.  Further, expected positive impact from seasonality will aid results.
 
Share Price Performance
 
 
Quanex has underperformed the industry in a year’s time. The company’s shares have dropped 4.9% compared with 20.2% growth registered by the industry.
 
Zacks Rank & Key Picks
 
Quanex currently carries a Zacks Rank #3 (Hold).
 
Some better-ranked stocks in the industry include Installed Building Products, Inc. (IBP - Free Report) , Patrick Industries, Inc. (PATK - Free Report) and Simpson Manufacturing Company, Inc. (SSD - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Installed Building Products has a long-term earnings growth rate of 30%. The stock has rallied 20% in a year’s time.
 
Patrick Industries has a long-term earnings growth rate of 12.7%. The company’s shares have gained 25% during the past year.
 
Simpson Manufacturing has a long-term earnings growth rate of 5%. Its shares have appreciated 59% over the past year.
 
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