Outdoor living products manufacturer AZEK Company (NYSE:AZEK) reported Q1 CY2025 results exceeding the market’s revenue expectations , with sales up 8.1% year on year to $452.2 million. On the other hand, the company’s full-year revenue guidance of $1.54 billion at the midpoint came in 0.9% below analysts’ estimates. Its non-GAAP profit of $0.45 per share was 2.9% above analysts’ consensus estimates.
Revenue: $452.2 million vs analyst estimates of $443.6 million (8.1% year-on-year growth, 1.9% beat)
Adjusted EPS: $0.45 vs analyst estimates of $0.44 (2.9% beat)
Adjusted EBITDA: $122.5 million vs analyst estimates of $119.6 million (27.1% margin, 2.4% beat)
The company reconfirmed its revenue guidance for the full year of $1.54 billion at the midpoint
EBITDA guidance for the full year is $410.5 million at the midpoint, below analyst estimates of $414.8 million
Operating Margin: 17.6%, in line with the same quarter last year
Free Cash Flow was $653,000, up from -$34 million in the same quarter last year
Market Capitalization: $7.16 billion
CHICAGO--(BUSINESS WIRE)--The AZEK Company Inc. (NYSE: AZEK) (“AZEK” or the “Company”), the industry-leading manufacturer of beautiful, low-maintenance and environmentally sustainable outdoor living products, including TimberTech® Decking and Railing, Versatex® and AZEK® Trim and StruXure® pergolas, today announced financial results for its fiscal second quarter ended March 31, 2025.
Company Overview
With a significant portion of its products made from recycled materials, AZEK (NYSE:AZEK) designs and manufactures goods for outdoor living spaces.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, AZEK’s 12.4% annualized revenue growth over the last five years was excellent. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
AZEK Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. AZEK’s annualized revenue growth of 8.4% over the last two years is below its five-year trend, but we still think the results were respectable.
AZEK Year-On-Year Revenue Growth
This quarter, AZEK reported year-on-year revenue growth of 8.1%, and its $452.2 million of revenue exceeded Wall Street’s estimates by 1.9%.
Looking ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
AZEK has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.9%, higher than the broader industrials sector.
Analyzing the trend in its profitability, AZEK’s operating margin rose by 15.1 percentage points over the last five years, as its sales growth gave it immense operating leverage.
AZEK Trailing 12-Month Operating Margin (GAAP)
This quarter, AZEK generated an operating profit margin of 17.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
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.
AZEK’s EPS grew at an astounding 17.9% compounded annual growth rate over the last five years, higher than its 12.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
AZEK Trailing 12-Month EPS (Non-GAAP)
We can take a deeper look into AZEK’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, AZEK’s operating margin was flat this quarter but expanded by 15.1 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 AZEK, its two-year annual EPS growth of 57.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q1, AZEK reported EPS at $0.45, up from $0.39 in the same quarter last year. This print beat analysts’ estimates by 2.9%. Over the next 12 months, Wall Street expects AZEK’s full-year EPS of $1.33 to grow 15.1%.
Key Takeaways from AZEK’s Q1 Results
We enjoyed seeing AZEK beat analysts’ revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance slightly missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock remained flat at $49.63 immediately following the results.
