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Weekly Studies

Quanex Building Products Corp. (NX), Mid/Small Cap AI Study of the Week

Quanex Building Products Corp. (NX), Mid/Small Cap AI Study of the Week

September 5, 2024

Weekly AI Study from the S&P 400 or S&P 600

Company Overview

Quanex Building Products Corporation, incorporated in Delaware in 2007, specializes in manufacturing components for original equipment manufacturers (OEMs) in the building products industry. Their product portfolio includes fenestration products such as energy-efficient insulating glass spacers and extruded vinyl profiles, as well as components for kitchen and bath cabinets. Additionally, Quanex produces solar panel sealants, vinyl decking, and other non-fenestration items. The company primarily serves the North American and UK markets, with operational facilities located in the U.S., UK, and Germany.

Quanex's growth strategy focuses on organic expansion, strategic acquisitions, and sustainability initiatives, positioning itself as a preferred supplier in the market. The company operates mainly in the fenestration and kitchen and bathroom cabinet door industries, competing with both large and small local players. Their end markets are primarily in the residential housing sector. Quanex employs a global sales force to market its products directly to OEMs in North America and Europe, while also utilizing distributors and sales agents. The company's operations are seasonal, with lower sales in winter and better performance in the third and fourth quarters, balanced somewhat by their kitchen and bathroom cabinet business. With approximately 3,792 employees across the U.S., UK, and Germany, Quanex emphasizes safety, compliance, and environmental sustainability. They also prioritize human capital through various training programs. Investors can access a range of reports through the SEC and the company's website, although website content is not considered part of the official reports.

By the Numbers

Annual 10-K Report for Fiscal Year Ended October 31, 2023:

  • Consolidated net sales: Decreased by 7% to $1,130,583,000.
  • Net income: Decreased by 7% to $82,501,000.
  • NA Fenestration segment net sales: Decreased by 3%.
  • EU Fenestration segment net sales: Decreased by 4%.
  • NA Cabinet Components segment net sales: Decreased by 22%.
  • Unallocated Corporate & Other operating loss: Increased by 128%.
  • Interest expense: Increased by $5.6 million, or 218%.
  • Average interest rate: 6.01% in 2023, up from 2.16% in 2022.
  • Pension settlement expenses: Contributed to a $6.6 million increase in other losses.
  • Cash provided by operating activities: Increased by $49.1 million.
  • Cash position as of October 31, 2023: $58.5 million.
  • Available credit under revolving credit facility: $305.0 million.
  • Share repurchases for fiscal years ending October 31:
    • 2023: 275,000 shares at $5.6 million.
    • 2022: 291,000 shares at $6.6 million.
    • 2021: 478,311 shares at $11.2 million.
  • Deferred tax assets as of October 31:
    • 2023: $11.8 million with a valuation allowance of $0.6 million.
    • 2022: $13.9 million with a valuation allowance of $0.5 million.
  • Liability for uncertain tax positions:
    • 2022: $1.4 million.
    • 2023: $0.3 million.
  • Pension obligations: Settled with a $6.3 million contribution, zero accumulated benefit obligation by October 31, 2023.

Quarterly 10-Q Report for Three Months Ended April 30, 2024:

  • Net sales: Decreased by 3% to $266.2 million.
  • Operating income: Decreased by 30% to $20.6 million.
  • SG&A expenses: Increased by 27%.
  • North American Fenestration segment net sales: Increased by 2%.
  • European Fenestration segment net sales: Decreased by 11%.
  • North American Cabinet Components segment net sales: Decreased by 5%.
  • Net income: Decreased by 29% to $15.4 million.

Quarterly 10-Q Report for Six Months Ended April 30, 2024:

  • Net sales: Decreased by 1%.
  • Cost of sales: Decreased by 3%, or $6.6 million.
  • SG&A expenses: Increased by 8%, or $2.2 million.
  • European Fenestration segment net sales: Decreased by 11%.
  • North American Cabinet Components segment net sales: Decreased by 13%.
  • Interest expense: Decreased by $2.5 million.
  • Cash position as of April 30, 2024: $56.1 million.
  • Available credit under credit facility: $321.3 million.
  • Cash provided by operating activities: Decreased by $1.5 million to $36.9 million.
  • Cash used for investing activities: Decreased by $89.2 million to $17.1 million.
  • Financing activities: $21.9 million used in 2024 compared to $54.3 million provided in 2023.

These figures highlight the company's financial performance, liquidity position, and capital management activities over the reported periods.

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