Quanex (NYSE:NX) Reports Strong Q1

Building products company Quanex (NYSE: NX) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 70% year on year to $452.5 million. The company expects the full year’s revenue to be around $1.85 billion, close to analysts’ estimates. Its non-GAAP profit of $0.60 per share was 27% above analysts’ consensus estimates.

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George Wilson, Chairman, President and Chief Executive Officer, commented, “Our results for the second quarter of 2025 came in as expected and reflected normal seasonality in our business. Revenue in March was approximately 6% higher than February and revenue in April was approximately 9% higher than March. It was also encouraging to see volume growth in our European Fenestration segment during the second quarter of 2025. We continue to be pleased with the integration of Tyman, and are now confident we will deliver approximately $45 million in cost synergies over time, compared to our original target of $30 million within the first two years post-acquisition. On a run-rate basis, we see a path to achieving the original $30 million cost synergy target by early fiscal 2026. We also took advantage of our low stock price during the second quarter and spent over $23 million repurchasing our shares.

Company Overview

Starting in the seamless tube industry, Quanex (NYSE: NX) manufactures building products like window, door, kitchen, and bath cabinet components.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Quanex grew its sales at an excellent 13.5% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Quanex’s annualized revenue growth of 18% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Fenestration and Cabinet Components, which are 33.4% and 11.3% of revenue. Over the last two years, Quanex’s Fenestration revenue (window and door components, North America only) averaged 3.4% year-on-year declines while its Cabinet Components revenue (cabinet parts, North America only) averaged 9.6% declines.

This quarter, Quanex reported magnificent year-on-year revenue growth of 70%, and its $452.5 million of revenue beat Wall Street’s estimates by 3.2%.

Looking ahead, sell-side analysts expect revenue to grow 15.3% over the next 12 months, a slight deceleration versus the last two years. Still, this projection is admirable and implies the market is baking in success for its products and services.

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Operating Margin

Quanex was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.3% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Quanex’s operating margin decreased by 4.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Quanex’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q1, Quanex generated an operating margin profit margin of 9%, up 1.3 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Quanex’s EPS grew at a spectacular 15% compounded annual growth rate over the last five years, higher than its 13.5% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Quanex’s two-year annual EPS declines of 5.4% were bad and lower than its 18% two-year revenue growth.

In Q1, Quanex reported EPS at $0.60, down from $0.66 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Quanex’s full-year EPS of $2.13 to grow 27.7%.

Key Takeaways from Quanex’s Q1 Results

We were impressed by how significantly Quanex blew past analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates.Zooming out, we think this quarter featured some important positives. The stock traded up 4.6% to $17.88 immediately after reporting.

Quanex put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.