Outdoor living products manufacturer AZEK Company (NYSE: AZEK) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 8.1% year on year to $452.2 million. On the other hand, the company’s full-year revenue guidance of $1.54 billion at the midpoint came in 0.9% below analysts’ estimates. Its non-GAAP profit of $0.45 per share was 3.1% above analysts’ consensus estimates.
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AZEK (AZEK) Q1 CY2025 Highlights:
- Revenue: $452.2 million vs analyst estimates of $443.6 million (8.1% year-on-year growth, 1.9% beat)
- Adjusted EPS: $0.45 vs analyst estimates of $0.44 (3.1% beat)
- Adjusted EBITDA: $124.4 million vs analyst estimates of $119.6 million (27.5% margin, 4% beat)
- The company reconfirmed its revenue guidance for the full year of $1.54 billion at the midpoint
- EBITDA guidance for the full year is $410.5 million at the midpoint, below analyst estimates of $414.8 million
- Operating Margin: 17.6%, in line with the same quarter last year
- Free Cash Flow was $653,000, up from -$34 million in the same quarter last year
- Organic Revenue rose 8.1% year on year (15.9% in the same quarter last year)
- Market Capitalization: $7.37 billion
StockStory’s Take
AZEK’s first quarter results reflected continued momentum in residential segment growth and strong channel expansion, with management attributing performance to robust sell-through of new products and expanded distribution partnerships. CEO Jesse Singh cited high single-digit residential sell-through and positive contractor feedback, while also highlighting the company’s focus on sustainable materials and operational discipline. Notably, investments in new product launches and recycling infrastructure modestly affected margins, but were positioned as necessary for long-term expansion.
Looking ahead, management reaffirmed its full-year guidance while acknowledging macroeconomic uncertainty and conservative channel inventory levels. Singh pointed to the proposed merger with James Hardie as an additional growth lever, emphasizing expected cost and sales synergies and positive early feedback from contractors and channel partners. Management remains cautious about potential market headwinds, but expressed confidence in AZEK’s ability to outperform the broader market through continued material conversion and disciplined execution.
Key Insights from Management’s Remarks
AZEK’s management identified several business factors shaping the quarter’s outperformance and provided updates on strategic initiatives that could influence future results.
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Residential Segment Momentum: The residential business saw high single-digit sell-through growth, driven by expanded channel presence and recent product launches under the TimberTech, AZEK Exteriors, and Versatex brands. Management noted these gains were supported by targeted merchandising investments and geographic expansion.
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New Product Adoption: Recent launches such as TimberTech Harvest+ decking, TimberTech Reliance Rail, and TrimLogic exterior trim products were well received by contractors and dealers. These offerings allowed AZEK to broaden its addressable market and target a wider range of price points and consumer preferences.
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Recycling and Sustainability Expansion: AZEK increased its vertically integrated recycling capacity, highlighted by the acquisition of Northwest Polymers. This move aims to further reduce input costs, increase recycled content in products, and support margin expansion objectives over time.
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Merger with James Hardie: Management discussed the proposed merger, citing anticipated $125 million in cost synergies and $500 million in incremental sales synergies. The combination is expected to provide a more comprehensive suite of solutions to contractors and accelerate material conversion away from traditional wood products.
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Channel Inventory and Macro Uncertainty: Leadership emphasized conservative management of channel inventory, keeping levels below historical averages as a precaution against economic uncertainty. Surveys indicated steady demand but some dealer and contractor concerns over the broader macro environment.
Drivers of Future Performance
AZEK’s outlook for the coming quarters rests on expanding material conversion, disciplined cost management, and leveraging the James Hardie merger for incremental growth, while remaining mindful of potential macroeconomic headwinds.
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Material Conversion Initiatives: Management sees continued opportunity in shifting demand away from wood toward low-maintenance, sustainable materials, with new products and expanded contractor education supporting share gains.
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Synergies from James Hardie Merger: The company expects significant cost and sales synergies from the proposed merger, particularly through combined sales efforts, broader product offerings, and supply chain optimization.
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Tariff and Input Cost Management: While AZEK’s domestic supply chain limits direct tariff exposure, management plans to offset any input cost increases with modest pricing actions, keeping a close watch on inflationary and geopolitical pressures.
Top Analyst Questions
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Keith Hughes (Truist): Asked about guidance details for Decking and Railing versus Exteriors in the second half, and near-term cost trends. Management declined to break out specifics but noted Deck, Rail, and Accessories were outgrowing Exteriors and that cost inflation was modest and being offset by pricing.
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Andrew Azzi (JPMorgan): Pressed for detail on sales force integration and recycling asset acquisitions post-merger. Management stated it was too early for specifics but expressed confidence in sales synergies and outlined recycling investments as part of long-term cost reduction.
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Elizabeth Langan (Barclays): Inquired about demand variation between Pro and retail channels, and quantified tariff impacts. AZEK reported slightly higher growth in Pro channels and estimated annual tariff exposure at $12 million to $15 million, with most impacts offset by price increases.
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Tim Wojs (Baird): Probed customer reaction to the James Hardie merger and rationale for conservative sell-through assumptions. Management cited positive contractor and channel partner feedback and clarified that conservative guidance reflects prudent planning rather than observed demand weakness.
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Charles Perron-Piche (Goldman Sachs): Sought clarity on market share gains versus the broader R&R market and the sustainability of double-digit growth. Management emphasized its historical outperformance versus a flat market and outlined new product traction and channel expansion as key to maintaining above-market growth.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will be tracking (1) the pace and breadth of new product adoption, particularly the performance of TimberTech and TrimLogic lines, (2) tangible progress toward realizing cost and sales synergies from the proposed James Hardie merger, and (3) the company’s ability to sustain margin expansion amid input cost pressures and macroeconomic uncertainty. Channel inventory levels and the response to any further pricing actions will also be important markers of execution.
AZEK currently trades at a forward P/E ratio of 33.5×. Is the company at an inflection point that warrants a buy or sell? Find out in our free research report.
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