Why Quanex Stock Skyrocketed by 22% on Friday
Key Points
While top-line growth was nothing to write home about, adjusted net income rose impressively.
It also crushed the average analyst estimate.
Quanex Building Products (NYSE: NX) stock was doing quite a good job of building investor wealth on the final day of the trading week. Thanks to a freshly issued earnings report that featured a crushing earnings beat, investors piled into the stock to leave it with a double-digit Friday gain of over 22%.
Third quarter triumph
Quanex published its fiscal third-quarter earnings release after market close on Thursday. For the period, it booked net sales of $501.8 million, which was up by 1% year over year. Net income not under generally accepted accounting principles (non-GAAP, or adjusted) rose higher, improving by 14% to $36 million, or $0.79 per share.
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The company's revenue came in slightly over the consensus analyst estimate of $498.4 million. We can't say the same for adjusted profitability, as Quanex blew well past the $0.65 per share collectively anticipated by those pundits.
In the earnings release, Quanex said its net sales were affected by favorable pricing developments. These, however, were offset by tariff reimbursements to clients. That pricing dynamic boosted profitability, along with other factors such as lower depreciation and amortization, and relatively modest interest payments.
Constructing a winner
Quanex operated in a relatively volatile environment during the quarter, marked by grinding conflict in the Middle East and persistent economic inflation. So it's admirable that it squeezed out some growth, particularly with that double-digit bottom-line gain.
Management's evident ability to navigate challenging times and conditions bodes well for the company, and I'd say this makes its stock worth a look -- particularly for investors bullish on the U.S. construction sector these days.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.