Water management company Northwest Pipe (NASDAQ:NWPX) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 2.6% year on year to $116.1 million. Its GAAP profit of $0.39 per share was 26.9% below analysts’ consensus estimates.
Revenue: $116.1 million vs analyst estimates of $111.9 million (2.6% year-on-year growth, 3.7% beat)
EPS (GAAP): $0.39 vs analyst expectations of $0.53 (26.9% miss)
Adjusted EBITDA: $10.12 million vs analyst estimates of $13.2 million (8.7% margin, 23.3% miss)
Operating Margin: 4.8%, down from 7.7% in the same quarter last year
Free Cash Flow was $1.18 million, up from -$30.66 million in the same quarter last year
Market Capitalization: $424.8 million
"In the first quarter of 2025, we encountered a mix of external challenges ranging from weather disruptions across multiple facilities to the uncertainty brought on by new trade policies from the incoming administration," said Scott Montross, President and Chief Executive Officer of Northwest Pipe Company.
Company Overview
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ:NWPX) is a manufacturer of pipeline systems for water infrastructure.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Northwest Pipe’s sales grew at an impressive 11.6% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
Northwest Pipe 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. Northwest Pipe’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 5.2% over the last two years was well below its five-year trend.
Northwest Pipe Year-On-Year Revenue Growth
This quarter, Northwest Pipe reported modest year-on-year revenue growth of 2.6% but beat Wall Street’s estimates by 3.7%.
Looking ahead, sell-side analysts expect revenue to remain flat 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.
Northwest Pipe has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.5%, higher than the broader industrials sector.
Analyzing the trend in its profitability, Northwest Pipe’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.
This quarter, Northwest Pipe generated an operating profit margin of 4.8%, down 2.9 percentage points year on year. Since Northwest Pipe’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.
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.
Northwest Pipe’s EPS grew at a weak 4% compounded annual growth rate over the last five years, lower than its 11.6% annualized revenue growth. However, its operating margin didn’t change during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.
Northwest Pipe Trailing 12-Month EPS (GAAP)
Diving into the nuances of Northwest Pipe’s earnings can give us a better understanding of its performance. A five-year view shows Northwest Pipe has diluted its shareholders, growing its share count by 2.9%. This has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Northwest Pipe Diluted Shares Outstanding
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Northwest Pipe, its two-year annual EPS growth of 4.8% is similar to its five-year trend, implying stable earnings.
In Q1, Northwest Pipe reported EPS at $0.39, down from $0.52 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Northwest Pipe’s full-year EPS of $3.27 to grow 5.2%.
Key Takeaways from Northwest Pipe’s Q1 Results
We were impressed by how significantly Northwest Pipe blew past analysts’ revenue expectations this quarter. On the other hand, its EPS and EBITDA missed significantly. Overall, this quarter could have been better, but the stock traded up 3.1% to $43.59 immediately following the results.
