Building products company Quanex (NYSE: NX) reported revenue ahead of Wall Streets expectations in Q3 CY2025, but sales were flat year on year at $489.8 million. Its non-GAAP profit of $0.83 per share was 61.2% above analysts’ consensus estimates.

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Company Overview

Starting in the seamless tube industry, Quanex (NYSE: NX) manufactures building products like window, door, kitchen, and bath cabinet components.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Quanex’s 16.6% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Quanex’s annualized revenue growth of 27.5% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Quanex’s $489.8 million of revenue was flat year on year but beat Wall Street’s estimates by 4.4%.

Looking ahead, sell-side analysts expect revenue to decline by 1% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

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Operating Margin

Quanex was profitable over the last five years but held back by its large cost base. Its average operating margin of 2.5% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Quanex’s operating margin decreased by 18.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Quanex’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Quanex generated an operating margin profit margin of 8.8%, up 8.2 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Quanex’s EPS grew at a remarkable 13.2% compounded annual growth rate over the last five years. However, this performance was lower than its 16.6% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Quanex’s earnings can give us a better understanding of its performance. As we mentioned earlier, Quanex’s operating margin expanded this quarter but declined by 18.2 percentage points over the last five years. Its share count also grew by 39%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Quanex, its two-year annual EPS declines of 8.5% mark a reversal from its (seemingly) healthy five-year trend. We hope Quanex can return to earnings growth in the future.

In Q3, Quanex reported adjusted EPS of $0.83, up from $0.61 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Quanex’s full-year EPS of $2.31 to shrink by 4.4%.

Key Takeaways from Quanex’s Q3 Results

It was good to see Quanex beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Management also added that "While the integration of the Tyman business is substantially complete, we still believe there is a path to realizing approximately $45 million in cost synergies over time, above our initial projection of $30 million, which has been fully realized." Zooming out, we think this was a solid print. The stock traded up 24.4% to $18.75 immediately after reporting.

Quanex may have had a good quarter, but does that mean you should invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.