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Imperial Capital Is Bullish On Quanex Ahead Of Q2 Earnings

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Imperial Capital Is Bullish On Quanex Ahead Of Q2 Earnings
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Quanex Building Products Corporation (NYSE: NX) is scheduled to report its 2Q16 results on May 31. Imperial Capital’s Scott Levine maintained an Outperform rating for the company, with a price target of $25. The analyst said that while the company likely witnessed healthy demand, its results could be impacted by currency headwinds.

Quanex’s quarterly results are likely to reflect healthy demand for windows and cabinet components, both in the US and in international markets. The demand is expected to have been driven by new housing construction as well as repair and remodeling activity, analyst Scott Levine said.

FX Impact

The deterioration of the British pound versus the US dollar is expected to have exerted pressure on the results, Levine mentioned. The UK accounts for more than 15 percent of the company’s revenue, following the acquisition of HL Plastics in 2015.

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Although there are concerns surrounding the implications of the UK’s potential exit from the EU, this is unlikely to have a significant impact on Quanex’s 2Q results. Rather, the company is likely to have benefited from favorable weather in the US, boosting earnings of several building products companies, the analyst added.

Levine expects the company to report its 2Q EPS at $0.05. The EPS estimates for 3Q and 4Q have been reduced from $0.36 to $0.35 and from $0.46 to $0.44, respectively.

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