Worthington Enterprises, Inc. (NYSE:WOR) is one of the 10 most undervalued industrial stocks to buy according to analysts. On January 19, Seaport Global reiterated its Buy rating on the Worthington Enterprises, Inc. (NYSE:WOR) stock. It also set a target price of $74. Last month, Canaccord Genuity lowered its price target for the shares from $73 to $69 on December 19. Canaccord analyst Brian McNamara adjusted the firm’s price target while maintaining a Buy rating on the stock. RBC Calls Kodiak Gas (KGS) Q ...

Core Insights - Worthington Enterprises Inc. has completed the acquisition of LSI Group, enhancing its position in the building envelope market [1][2] - LSI Group is recognized as one of the largest U.S. manufacturers of standing-seam metal roof clips and retrofit components [1] Company Overview - Worthington Enterprises operates in two primary business segments: Building Products and Consumer Products [2] - The Building Products segment includes HVAC, metal roofing components, and construction solutions, while the Consumer Products segment covers tools and outdoor living [2] - The company employs approximately 4,000 people across North America and Europe [3] Corporate Philosophy and Community Engagement - Founded in 1955, Worthington Enterprises follows a people-first philosophy, prioritizing shareholder earnings [4] - The company engages with local communities through volunteer efforts and workforce development programs [4]

Summary of Worthington Enterprises Conference Call Company Overview - **Company Name**: Worthington Enterprises - **Industry**: Consumer and Building Products - **Background**: Formerly known as Worthington Industries, the company separated its steel processing business on December 1, 2023, creating distinct value opportunities for both entities [3][4] Core Business Segments - **Business Segmentation**: - Building Products: Approximately 60% of revenue, 75% of EBITDA [8][9] - Consumer Products: Includes tools, outdoor living products, and celebrations [12][21] - **Manufacturing**: Over 80% of products are sourced and manufactured in the U.S. [5] Financial Performance - **Recent Financials**: - Adjusted EBITDA increased by 21%, nearly $50 million year-over-year [19] - EBITDA margins expanded by approximately 260 basis points [19] - Free cash flow conversion is nearly 96% [23] - **CapEx**: $30 million spent on facility modernization projects, with an additional $30 million planned [23][41] Strategic Initiatives - **M&A Strategy**: - Focus on acquiring high-margin, lower capital intensity businesses in niche markets [16] - Recent acquisitions include Elgin and LSI, both expected to enhance the company's portfolio [18][39] - **Innovation and Transformation**: Emphasis on continuous improvement and operational excellence [6][8] Market Dynamics - **Consumer Products**: - Facing headwinds from tariffs, high interest rates, and cautious consumer spending [13][21] - Store count for Balloon Time products increased by 63% over the last two years [12] - **Building Products**: - Strong performance in heating and cooking, with a shift from heating oil to propane noted [31][32] - Joint ventures like WAVE and ClarkDietrich are performing well despite market fluctuations [25][26] Challenges and Risks - **Tariff Exposure**: Approximately 6%-7% of revenue is affected by tariffs, primarily from Asian imports [33][34] - **Market Conditions**: Commercial construction is expected to peak in May 2024, with potential slowdowns thereafter [11][26] Competitive Positioning - **Market Leadership**: The company positions itself as a domestic manufacturer with a strong value proposition, particularly in the building products sector [34] - **Financial Flexibility**: Maintains a conservative leverage ratio of less than 0.5 times net debt to EBITDA, allowing for strategic capital deployment [43][44] Conclusion - Worthington Enterprises is well-positioned for growth through strategic acquisitions, operational excellence, and a focus on innovation, despite facing macroeconomic challenges and tariff-related risks. The company’s strong financial performance and market leadership in niche segments provide a solid foundation for future opportunities.

Financial Performance - Net sales for the three months ended November 30, 2025, were $327,452 thousand, a 19.5% increase from $274,046 thousand in the same period of 2024[27] - Gross profit for the six months ended November 30, 2025, was $166,913 thousand, up 22.3% from $136,554 thousand in the prior year[27] - Operating income for the three months ended November 30, 2025, was $12,264 thousand, compared to $3,521 thousand in the same period of 2024, representing a significant improvement[27] - Net earnings attributable to controlling interest for the six months ended November 30, 2025, were $62,476 thousand, a 18.9% increase from $52,513 thousand in the same period of 2024[27] - Adjusted EBITDA for the six months ended November 30, 2025, was $125,538 million, compared to $104,649 million for the same period in 2024, reflecting an increase of about 19.9%[76] - Total net sales for the three months ended November 30, 2025, were $327,452 million, an increase from $274,046 million in the same period of 2024, representing a growth of approximately 19.5%[75] - Adjusted EBITDA for the three months ended November 30, 2025, was $60.5 million, a 7.6% increase from $56.2 million in the prior year[129] Cash and Liquidity - Cash and cash equivalents at the end of the period were $180,288 thousand, a decrease from $250,075 thousand at the beginning of the period[33] - The company reported a net cash provided by operating activities of $51,518 thousand for the three months ended November 30, 2025, compared to $49,053 thousand in the same period of 2024[33] - Net cash provided by operating activities was $92.6 million for the six months ended November 30, 2025, an increase of $2.4 million compared to the prior year[158] - Net cash used by investing activities was $117.9 million during the six months ended November 30, 2025, primarily due to the acquisition of Elgen and capital expenditures[159] - Net cash used by financing activities was $44.5 million for the six months ended November 30, 2025, including $20.0 million for share repurchases and $18.2 million in dividends[161] - The company has $500,000 million available under its multi-year revolving Credit Facility, with no borrowings outstanding as of November 30, 2025[56] - The company had no outstanding borrowings against its $500.0 million Credit Facility as of November 30, 2025, indicating full borrowing capacity available for future use[164] Assets and Liabilities - Total assets increased to $1,753,333 thousand as of November 30, 2025, compared to $1,695,152 thousand as of May 31, 2025[25] - Total liabilities rose to $790,310 thousand as of November 30, 2025, from $756,915 thousand as of May 31, 2025[25] - As of November 30, 2025, the total equity balance was $963.023 million, with controlling interest at $962.599 million and noncontrolling interest at $424 thousand[58] Dividends and Share Repurchase - The company declared cash dividends of $0.19 per common share for the three months ended November 30, 2025, compared to $0.17 in the same period of 2024[27] - The company declared cash dividends totaling $9.432 million for the six months ended November 30, 2025, consistent with the previous period[58] - The company repurchased 350,000 common shares during the six months ended November 30, 2025, leaving 5,015,000 shares available for repurchase[59] - The total number of common shares purchased from September 1 to November 30, 2025, was 286,578 shares, with an average price of $55.65 per share[177] - The maximum number of common shares that may yet be purchased under the publicly announced repurchase plans is 5,015,000 as of November 30, 2025[177] Acquisitions and Investments - The company acquired Elgen for $91,184 million, which is expected to enhance the Building Products segment's performance[79] - Goodwill from the Elgen acquisition amounted to $34,783 million, reflecting strategic benefits beyond the fair value of identifiable net assets[81] - The total identifiable assets acquired from Elgen were valued at $99,591 million, with intangible assets accounting for $34,800 million[82] - The company signed an agreement to acquire LSI for approximately $205 million, expected to close in January 2026, enhancing its Building Products segment[102] - On December 3, 2025, the company acquired Hydrostat's propane distribution and refurbishment assets for approximately $9.578 million, which will also be reported under Building Products starting Q3 fiscal 2026[103] Market Conditions and Demand - The company reported that demand for its products is closely tied to macroeconomic conditions, with moderate inflation and high mortgage rates impacting consumer sentiment and construction activity[116] - Inventory levels at key retail and distributor customers remained aligned with end-consumer demand, with no material build-up in distribution or retail channels[119] - The company expects demand to remain uneven as market participants await clearer signals on inflation and economic momentum[117] - U.S. residential construction spending was approximately 5% below prior year levels, while non-residential construction remained stable[121] - Existing home sales improved in November 2025, but authorized housing permits and private housing starts declined, indicating a weaker forward pipeline[121] - Builder sentiment, measured by the HMI, was at 38 in November 2025, marking the 19th consecutive month below the 50 threshold, with 41% of builders reporting price cuts[121] Financial Reporting and Compliance - The effective tax rate disclosures will be enhanced starting with the 2026 Form 10-K due to the adoption of ASU 2023-09[42] - The company expects no material impact on its financial condition from the adoption of ASU 2024-03 regarding expense disaggregation disclosures[43] - The estimated annual effective tax rate (ETR) for both the six months ended November 30, 2025, and November 30, 2024, was 24.1%[68] - Income tax expense for the three months ended November 30, 2025, was $8.8 million, a decrease of 3.3% from $9.1 million in the prior year quarter[145] - The company remains in compliance with financial covenants of its debt agreements, which do not include credit rating triggers or material adverse change provisions[164] - There were no changes in internal control over financial reporting that materially affected the company's financial reporting during the period covered[171] - The company is involved in various judicial and administrative proceedings but does not expect any material adverse effects on its business or financial position[173] - Risk factors have not changed significantly from those disclosed in the 2025 Form 10-K, which could materially affect the company's business and financial condition[174] - The company maintains effective disclosure controls and procedures, ensuring timely and accurate reporting of required information[169]

Core Insights - Worthington Enterprises will participate in the CJS Securities New Ideas for the New Year conference on January 14, 2026, at 8:45 a.m. ET [1] - The company's leadership will discuss strategies for growth and shareholder value through innovation, transformation, and M&A [2] Company Overview - Worthington Enterprises is a designer and manufacturer of brands that enhance everyday life, operating in two main segments: Building Products and Consumer Products [3] - The Building Products segment includes solutions for heating, cooling, cooking, construction, and water systems, while the Consumer Products segment focuses on tools, outdoor living, and celebrations [3] - The company employs approximately 4,000 people across North America and Europe [4] Corporate Philosophy and Community Engagement - Founded in 1955, Worthington Enterprises prioritizes a people-first philosophy, aiming to generate profits for shareholders while empowering employees [5] - The company is actively involved in local communities through volunteer efforts and the Worthington Companies Foundation, and it participates in workforce development programs [5]

Core Viewpoint - The investment strategy focuses on long-term investments while also utilizing short-term shorts to identify alpha opportunities through bottom-up analysis of individual companies' fundamentals [1] Group 1: Investment Strategy - The approach emphasizes medium to long-term investment duration [1] - The goal is to identify companies with strong fundamentals, sustainable competitive advantages, and growth potential [1]

Financial Performance - Net sales for Q2 2026 were $327.5 million, an increase of 19% compared to Q2 2025[4] - Adjusted net earnings increased by 7% to $32.5 million, while net earnings decreased by 3% to $27.0 million[4] - Adjusted EBITDA grew 8% to $60.5 million, with operating income rising to $12.3 million from $3.5 million in the prior year[4][7] - Free cash flow improved by 15% to $39.1 million, up from $33.9 million in Q2 2025[4][11] - Operating cash flow for the quarter was $51.5 million, a 5% increase from $49.1 million in Q2 2025[4][11] - For the three months ended November 30, 2025, the GAAP net earnings were $27,328 thousand, with a diluted EPS of $0.55, while non-GAAP net earnings were $32,460 thousand, resulting in a diluted EPS of $0.65[35] - The adjusted EBITDA for the six months ended November 30, 2025, was $125,538 thousand, compared to $104,649 thousand for the same period in 2024, reflecting a year-over-year increase of approximately 20%[39] - Free cash flow for the three months ended November 30, 2025, was $39,086 thousand, up from $33,892 thousand in the same period of 2024, indicating a growth of about 15%[42] - The operating cash flow conversion for the six months ended November 30, 2025, was 148%, compared to 172% for the same period in 2024[42] Segment Performance - Building Products segment net sales increased by 31.9% to $207.5 million, driven by higher volumes and contributions from Elgen Manufacturing[14] - Consumer Products segment generated net sales of $119.9 million, a 2.7% increase over the prior year quarter[13] - The Building Products segment reported net sales of $207,528 thousand for the three months ended November 30, 2025, a 32.0% increase from $157,298 thousand in the same period of 2024[31] Assets and Liabilities - Total debt at quarter end was $305.3 million, with no borrowings under the revolving credit facility[12] - Total assets as of November 30, 2025, were $1,753,333 thousand, an increase from $1,695,152 thousand as of May 31, 2025[27] - Cash and cash equivalents decreased to $180,288 thousand from $250,075 thousand at the beginning of the period[29] Dividends and Shareholder Returns - The company declared a quarterly dividend of $0.19 per common share, payable on March 27, 2026[4] - Dividends declared per common share increased to $0.19 for the three months ended November 30, 2025, compared to $0.17 in the same period of 2024[25] Acquisitions and Investments - The company announced an agreement to acquire LSI Group for approximately $205 million, expected to close in January 2026[4][15] - The company’s investment in property, plant, and equipment for the three months ended November 30, 2025, was $12,432 thousand, compared to $15,161 thousand in the same period of 2024[42] Other Financial Metrics - Adjusted EBITDA margin for the consolidated results was 18.5% for the three months ended November 30, 2025, down from 20.5% in the same period of 2024[31] - The adjusted EBITDA margin for the three months ended November 30, 2025, was 18.5%, down from 20.5% in the same period of 2024[39] - The company reported a restructuring and other expense of $1,644 thousand for the three months ended November 30, 2025, which impacted the GAAP earnings[35] - The loss on the partial sale of investment in SES was $2,950 thousand for the three months ended November 30, 2025, affecting the overall earnings[35] - The net earnings attributable to controlling interest for the six months ended November 30, 2025, was $62,476 thousand, compared to $52,513 thousand in 2024, representing a year-over-year increase of approximately 19%[42]

Group 1 - The Hecht Commodity Report is a comprehensive resource covering market movements of over 29 different commodities, providing various trading recommendations and actionable ideas for traders and investors [1] - Worthington Enterprises (WOR) recently reported earnings that exceeded consensus EPS and revenue forecasts, although the stock experienced a correction post-report [2] - The author of the report, Andrew Hecht, has extensive experience in commodities and precious metals, running a well-regarded investing group that offers insights into market trends [2]

Core Insights - Worthington Enterprises Inc. reported a fiscal 2026 second-quarter EPS of $0.65, missing the estimated $0.704 by 9.72%, although it showed a slight increase from $0.60 a year ago [1][6] - The company generated revenue of approximately $327.5 million, exceeding the estimated $310.6 million, representing a 19% year-over-year increase from $274.05 million [2][6] - Adjusted net earnings rose by 7% to $32.5 million, and adjusted EBITDA increased by 8% to $60.5 million, indicating improved financial performance [3][6] Financial Performance - Operating cash flow increased by 5% to $51.5 million, while free cash flow improved by 15% to $39.1 million, reflecting the company's efforts to enhance financial metrics [3] - The company repurchased 250,000 common shares for $13.7 million, indicating a commitment to increasing shareholder value, with 5,015,000 common shares remaining outstanding [4] - Worthington's financial ratios include a P/E ratio of 26.13 and a debt-to-equity ratio of 0.36, suggesting a strong financial position with low debt levels [4] Liquidity and Investment Metrics - The current ratio of 3.26 indicates a strong ability to cover short-term liabilities with short-term assets [5] - An earnings yield of 3.83% suggests a favorable return on investment based on earnings, demonstrating solid financial health and potential for future growth [5]

Financial Data and Key Metrics Changes - Revenue in Q2 increased by over 19% year-over-year, reaching $327 million compared to $274 million in the prior year quarter [5][18] - Adjusted EBITDA grew by 8% year-over-year, totaling $60 million, with an adjusted EBITDA margin of 18.5% [5][19] - Adjusted earnings per share rose to $0.65 from $0.60 in the prior year quarter [17][18] - Gross profit increased to $85 million, with a gross margin of 25.8%, down from 27% in the prior year quarter [19] Business Line Data and Key Metrics Changes - Consumer products net sales were $120 million, up 3% year-over-year, with adjusted EBITDA flat at $15 million [24] - Building products net sales grew 32% year-over-year to $208 million, driven by higher volumes and contributions from the Elgen acquisition [26][28] - Excluding Elgen, building products net sales increased by 16% year-over-year [26] Market Data and Key Metrics Changes - The company noted mixed market conditions, with cautious consumers and muted construction activity impacting performance [14] - The acquisition of LSI is expected to enhance the company's position in engineered building systems and add resilient revenue streams [12][14] Company Strategy and Development Direction - The company aims to optimize its business through organic growth and strategic acquisitions while increasing margins [6][8] - The planned acquisition of LSI, a leader in metal roofing components, aligns with the strategy of adding market leaders in niche markets [12][13] - The company continues to focus on innovation and transformation as key growth drivers [8][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current environment and gaining market share despite challenging conditions [5][14] - The company is well-positioned for growth as it enters its seasonally strongest quarters [29] - Management highlighted the importance of their workforce and recognized the company for its workplace culture and responsibility [15] Other Important Information - The company reported a net debt to trailing adjusted EBITDA ratio of approximately 0.4 times, indicating strong financial flexibility [22] - Capital expenditures totaled $12 million in the quarter, with plans for continued investment in operations [20][21] Q&A Session Summary Question: Can you expand on the strategy for growth from the acquisition of LSI? - Management emphasized the complementary nature of acquisitions and the focus on leveraging manufacturing expertise and innovation [32][33] Question: What are the opportunities related to data centers? - Management noted that several business segments provide products for data centers, contributing to growth, though it represents less than 10% of total sales [39][40] Question: How sustainable is LSI's margin profile? - Management highlighted LSI's strong reputation and resilient demand, indicating a sustainable margin profile driven by retrofit opportunities [46][48] Question: What is the outlook for ClarkDietrich? - Management acknowledged challenges in the new construction environment but expressed confidence in maintaining flat performance moving forward [56][58] Question: How does the company plan to balance capital allocation? - Management indicated a balanced approach to capital structure, including strategic M&A and returning capital to shareholders [58]