Quanex Building Products Now Worth Buying, Imperial Capital Says

In a report published Thursday, Imperial Capital analyst Scott Levine upgraded the rating on

from In-Line to Outperform, while raising the price target from $21 to $23.50. The analyst believes that the acquisition of HL Plastics is helping to drive Quanex's growth story. Quanex has announced the acquisition of HL Plastics on June 16, 2015. HL Plastics is a leading provider of vinyl extrusion products in the UK and Ireland. The analyst expects the acquisition to be significantly accretive to Quanex's earnings and help the company expand its product platform in the UK. The transaction is also likely to increase Quanex's exposure to "a market that is in the early stages of its recovery, thereby broadening its potential for intermediate-term growth," the Imperial Capital report stated. Following the earnings slowdown in 2H14, Quanex has been able to achieve an improvement in its operating trends in recent times. "We expect NX to benefit from increased window demand resulting from a recovery in new housing and repair and remodeling (R&R) activity, and expect earnings to accelerate, reflecting recent operational improvement in the vinyl business, and accretive capital deployment," Levine explained. The company reported revenues of $604 million, EBITDA of $49 million and net income of $11 million in the 12 months ended April 30, 2015. Given that the balance sheet continues to be strong, the FY15 and FY16 estimates have been raised for the company.