Why Quanex Building Products stock is rising today

Quanex construction products (NX 18.12%) beat Wall Street expectations for the quarter and raised its full-year outlook, predicting big things from the recently closed acquisition.

Wall Street reacted favorably to the news, sending shares of Quanex up 20% as of 10:30 a.m. ET.

Solid quarter, better guidance

Quanex manufactures a wide range of building materials including windows, doors, vinyl fencing, refrigeration and cabinetry. Last month, the company completed a $1.1 billion acquisition of Tyman in the UK to increase its geographic diversification and add expertise in new product lines.

The company’s last full quarter before the deal was a strong one. Quanex earned $0.73 per share in the fiscal third quarter (ended July 31) on revenue of $280.4 million, beating the Wall Street consensus estimate of $0.70 per share on $278 million.

For the full fiscal year, Quanex now expects revenue of $1.28 billion to $1.29 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $171 million to $176 million dollars. The company previously estimated revenue of $1.1 billion and adjusted EBITDA of $145 million to $150 million.

Is Quanex a buy?

Revenue fell 6% year over year, a reflection of weak demand in end markets such as housing, which were hit by higher rates. But CEO George Wilson sees big things ahead.

“Demand has remained weak, but we believe the building products industry will benefit from pent-up demand once interest rates begin to decline and consumer confidence is restored,” Wilson said. “Looking ahead, work is underway to integrate the recently acquired Tyman business and create something new and special in the building products industry.”

Even with Friday’s gains, Quanex shares are still 25% lower than they were earlier this year. If Wilson is right and calls for gains from here, Quanex stock could still have plenty of room to run.