AZEK reported impressive results that were ahead of estimates and the 3Q23 guide, driven by an acceleration in residential sell-through, which was up double digits Y/Y, the analyst notes. 

The commercial segment faced continued demand headwinds, but channel destocking is expected to be substantially complete by fiscal year-end, mentions the analyst.

The analyst applauds the company's impressive performance in the residential business as AZEK continues to execute on-shelf space wins and new product roll-outs, significantly outpacing market growth.

Following Q3 results, the analyst raised Q4 net sales guidance to $365.7 million (from $334.3 million), adj. EBITDA of $93 million (from $84.8 million) and operating EPS estimate of $0.27 (from $0.24).

Merkousko raised FY23 net sales estimates to $1.347 billion (from $1.294 billion), adj. EBITDA of $277.9 million (from $257.3 million) and operating EPS of $0.66 (from $0.56). For FY23, residential sales growth is expected to be 2.5%, and Commercial top-line decline is projected to be (20%).

For FY24, the analyst sees net sales of $1.465 billion (from $1.363.1 billion), adj. EBITDA of $346.2 million (from $310 million) and operating EPS of $1.03 (from $0.88). 

Merkousko rolled out FY25 estimates. For FY25, the analyst expects net sales of $1.582 billion, adj. EBITDA of $382 million, and operating EPS of $1.21. 

Price Action: AZEK shares are trading higher by 6.43% to $33.27 on the last check Wednesday.