CSW (NASDAQ:CSWI) Reports Sales Below Analyst Estimates In Q1 Earnings
Is now the time to buy CSW? Find out in our full research report.
Revenue: $230.5 million vs analyst estimates of $232.8 million (9.3% year-on-year growth, 1% miss)
Adjusted EPS: $2.24 vs analyst estimates of $2.22 (1.1% beat)
Adjusted EBITDA: $59.76 million vs analyst estimates of $60.37 million (25.9% margin, 1% miss)
Operating Margin: 19.5%, down from 22% in the same quarter last year
Free Cash Flow Margin: 9.9%, up from 8.3% in the same quarter last year
Market Capitalization: $5.28 billion
"Total revenue increased 10.8% to $878.3 million, of which $47.5 million, or 6.0%, was inorganic growth from recent acquisitions, and 4.8%, or $37.9 million was organic growth. Contractor Solutions delivered organic revenue growth of 6.2% during the fiscal full year. Net income attributable to CSWI of $136.7 million, or $137.2 million adjusted, increased 25.7% as compared to $109.1 million. EPS of $8.38, or $8.41 adjusted, improved 20.0% compared to $7.01. Adjusted EBITDA increased 13.9% to $227.9 million, including margin expansion of 70 bps to 25.9%. Invested $84.7 million in acquisitions of PSP Products and PF Waterworks and $16.3 million in organic capital expenditures, while returning total cash of $32.9 million to shareholders through share repurchases of $18.3 million and dividends of $14.6 million. Subsequent to fiscal year-end, announced transfer of listing of common stock to the New York Stock Exchange beginning June 9, 2025, and change in ticker symbol to CSW" Comments from the Chairman, President, and Chief Executive Officer
With over two centuries of combined operations manufacturing and supplying, CSW (NASDAQ:CSWI) offers special chemicals, coatings, sealants, and lubricants for various industries.
A company's long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, CSW grew its sales at an incredible 17.9% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
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. CSW's annualized revenue growth of 7.7% over the last two years is below its five-year trend, but we still think the results were respectable.
This quarter, CSW's revenue grew by 9.3% year on year to $230.5 million, missing Wall Street's estimates.
Looking ahead, sell-side analysts expect revenue to grow 12.6% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and indicates its newer products and services will spur better top-line performance.
Today's young investors likely haven't read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
CSW has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.7%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, CSW's operating margin rose by 3.9 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q1, CSW generated an operating profit margin of 19.5%, down 2.5 percentage points year on year. Since CSW's operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
CSW's EPS grew at an astounding 24.5% compounded annual growth rate over the last five years, higher than its 17.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into CSW's earnings to better understand the drivers of its performance. As we mentioned earlier, CSW's operating margin declined this quarter but expanded by 3.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For CSW, its two-year annual EPS growth of 17.6% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q1, CSW reported EPS at $2.24, up from $2.04 in the same quarter last year. This print beat analysts' estimates by 1.1%. Over the next 12 months, Wall Street expects CSW's full-year EPS of $8.57 to grow 11%.
Revenue missed slightly, but EPS beat slightly. Overall, we'd call this quarter fairly online, neither great nor terrible. The stock remained flat at $312.45 immediately following the results.
CSW's latest earnings report disappointed. One quarter doesn't define a company's quality, so let's explore whether the stock is a buy at the current price. If you're making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it's free.
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