On Jun 26, 2015, shares of Quanex Building Products Corporation NX hit a 52-week high of $21.93, driven by the HL Plastics acquisition. Average volume of shares traded over the last three months stood at approximately 187,197.
Quanex has a market cap of $741 million. Year-to-date, the stock has returned 17%, much above 3.10% by the S&P 500.
Quanex’s share price has been on the rise since Jun 16, following the announcement of its acquisition of United Kingdom's fastest growing vinyl profile extruder, HL Plastics, in an all-cash transaction valued at approximately $145 million. The acquisition is expected to drive both top and bottom-line growth as it will expand the company’s presence in the favorable UK market while giving it access to new and complementary product lines.
The acquisition will add $100 million to Quanex’s revenues and will be accretive to earnings starting in 2016. Along with bringing HL Plastics' skilled vinyl extrusion expertise to Quanex, the buyout presents highly complementary product growth opportunities for existing HL customers in conservatory roofs, hardware, foam trim products and related categories.
Moreover, Quanex Building plans to complete or partially rebuild another 35 extrusion lines, of which 13 have been completed. The remainder will be finished by early fourth quarter. The company finished the installation of the two lines relocated from Kentucky to Greenville, TX after being completely rebuilt. A new high output line will be installed in Greenville in the fourth quarter. This will complete the planned expansion of this facility by more than doubling its capacity.
In the long-term, Quanex Building is hopeful about window shipments and expects the same to recover within 4–5 years from now. This will help the company to deliver revenues in the $825 million to $875 million range with EBITDA levels of $115 million to $130 million.
With respect to performance, this Zacks Rank #1 (Strong Buy) stock delivered positive earnings surprises in three of the last four quarters, with an average beat of 147.4%.
These positives drove the Zacks Consensus Estimate higher as all the estimates moved north, increasing 18% to 53 cents for 2015 and 12% to 73 cents for 2016 in the last 30 days.
Other Stocks to Consider
Investors interested in Building and Construction – Misc sector can also take a look at Headwaters Incorporated HW, Aspen Aerogels, Inc. ASPN and Gibraltar Industries, Inc. ROCK. While Headwaters sports the same rank as Quanex, Aspen Aerogels and Gibraltar carry a Zacks Rank #2 (Buy)
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