Quanex (NYSE: NX) reported Q4 EPS of $0.42, $0.04 better than the analyst estimate of $0.38. Revenue for the quarter came in at $240.4 million versus the consensus estimate of $239.5 million.

Bill Griffiths, Chairman, President and Chief Executive Officer, commented, “Overall we are pleased with our fourth quarter and full year 2019 results. Despite what has been a softer demand environment compared to our original forecast for 2019, we converted well operationally and benefitted from improved pricing. On a consolidated basis, we were able to realize Adjusted EBITDA margin expansion of approximately 410 basis points in the fourth quarter and approximately 140 basis points for the full year. Furthermore, in our North American Fenestration segment, those margins expanded by approximately 250 basis points in the fourth quarter and approximately 110 basis points for the full year. In Europe, the margins improved by approximately 340 basis points in the fourth quarter and approximately 300 basis points for the full year. It is important to note that even with softer-than-expected volumes, sales in our North American Fenestration segment grew at 6.0% during the fourth quarter and 3.8% for the full year, which compares favorably to Ducker’s latest window shipment estimate of negative 0.4% for the three months ended September 30, 2019 and negative 1.6% for the twelve months ended September 30, 2019. Excluding foreign exchange impact, we realized above market sales growth of 3.3% during the fourth quarter and 9.1% for the full year in our European Fenestration segment. Volumes in our North American Cabinet Components segment continue to be negatively impacted by the ongoing shift in the market from semi-custom to stock cabinets and strategy changes amongst certain customers.

“Our ongoing effort to improve working capital helped us achieve another year of solid Free Cash Flow generation, which allowed us to pay down $52.5 million in bank debt, $35 million in the fourth quarter alone, and buyback approximately $9.6 million in stock. The goal was to generate $50 million to $55 million of Free Cash Flow in fiscal 2019 and exit the year with a leverage ratio of Net Debt to LTM Adjusted EBITDA of 1.5x. Needless to say we comfortably exceeded those targets in fiscal 2019 by generating $71.5 million in Free Cash Flow and exiting the year with a leverage ratio of Net Debt to LTM Adjusted EBITDA of 1.2x.”

GUIDANCE:

Quanex sees FY2020 revenue of $865-885 million, versus the consensus of $894.02 million.

Bill Griffiths, Chairman, President and Chief Executive Officer, stated, “Based on current trends and the latest macro data, we are taking a measured approach to our 2020 revenue forecast. As such, we expect low single-digit sales growth in our North American and European Fenestration segments, offset by a continued decline in revenues in our North American Cabinet Components segment. Overall, on a consolidated basis, this should equate to sales of approximately $865 million to $885 million in fiscal 2020. However, we expect to continue on our journey of operational excellence by converting well and managing costs. Therefore, we expect to generate between $102 million and $110 million in Adjusted EBITDA* in fiscal 2020, which would yield margin expansion of approximately 60 basis points to the midpoint of guidance. We plan to stay focused on generating cash and maintaining a strong balance sheet while also continuing to opportunistically repurchase stock.”

For earnings history and earnings-related data on Quanex (NX) click here.