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AZEK Co Inc (AZEK) Raises Fiscal 2024 Outlook Following Strong Q2 Performance

GuruFocus Research
·4-min read

  • Consolidated Net Sales: Reported at $418.4 million for the quarter, an 11% increase year-over-year, surpassing the estimated $412.74 million.

  • Net Income: Expected to be between $74 million and $75 million, exceeding the forecast of $55.88 million.

  • Net Profit Margin: Anticipated to range from 11.2% to 11.4% for the quarter.

  • Adjusted EBITDA: Forecasted to be between $167 million and $169 million, indicating strong profitability and operational efficiency.

  • Residential Segment Net Sales: Achieved $402.5 million, marking an 18% increase from the previous year, driven by robust demand and strategic shelf space gains.

  • Fiscal 2024 Outlook: Raised net sales projections to between $1.407 billion and $1.438 billion and Adjusted EBITDA to between $364 million and $380 million, reflecting confidence in continued market outperformance and margin expansion.

  • Shareholder Returns: Returned $25 million to shareholders through share repurchases during the fiscal second quarter.

On May 8, 2024, The AZEK Co Inc (NYSE:AZEK), a leader in the design and manufacture of sustainable outdoor living products, released its preliminary financial results for the second quarter of fiscal year 2024. The announcement was made through an 8-K filing, highlighting significant year-over-year growth and an optimistic revision of the full-year financial outlook.

Company Overview

The AZEK Co Inc operates primarily in the Outdoor Living market, offering a range of products from decking to pergolas under brands like TimberTech, AZEK, and Versatex. The company has a strong focus on sustainability, utilizing recycled materials across its product lines. AZEK's operations are segmented into Residential and Commercial, with the majority of revenue generated from the Residential segment.

Q2 Fiscal 2024 Performance Highlights

For the quarter ended March 31, 2024, AZEK reported consolidated net sales of $418.4 million, marking an 11% increase compared to the same period last year. The Residential segment, in particular, saw an 18% growth in net sales, reaching $402.5 million. This growth is attributed to effective execution in the Residential segment, enhanced brand momentum, and the realization of margin expansion initiatives.

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The company's net income for the first half of the fiscal year is estimated to be between $74 million and $75.4 million, with a net profit margin ranging from 11.2% to 11.4%. Adjusted EBITDA for the same period is projected to be between $166.69 million and $168.69 million, demonstrating robust profitability and operational efficiency.

Strategic Initiatives and Market Positioning

AZEK's performance is supported by several strategic initiatives including new product launches and increased consumer engagement. Notably, the company's TimberTech Advanced PVC Vintage Collection and Landmark Collection have set new industry standards with their top-rated fire resistance, while the new TimberTech Composite Terrain+ Collection has been recognized for its innovative design and sustainability.

These innovations, along with strategic shelf space gains in both professional and retail channels, have positioned AZEK as a leader in the outdoor living industry. The company's focus on R&D and marketing has enhanced the consumer journey, further strengthening AZEK's market presence.

Financial Outlook and Forward Guidance

Encouraged by the strong performance in the first half of fiscal 2024, AZEK has raised its full-year guidance. The company now expects net sales to range between $1.407 billion and $1.438 billion, with an Adjusted EBITDA forecast of $364 million to $380 million. These figures represent an increase from previous projections, underscoring the company's confidence in its growth trajectory and operational strategies.

For the third quarter of fiscal 2024, AZEK anticipates consolidated net sales between $385 million and $400 million, and Adjusted EBITDA between $103 million and $110 million. This outlook reflects the company's ongoing commitment to growth and margin expansion.

Addressing Financial Restatements

During the fiscal quarter closing process, a discrepancy in inventory balance was identified, leading to a restatement of financial results for previous periods. This restatement, attributed to inaccuracies by a former employee, has been resolved with no impact on net sales or the fundamental operations of the business.

In conclusion, The AZEK Co Inc's impressive performance in the second quarter of fiscal 2024, coupled with strategic initiatives and a strong market positioning, provides a solid foundation for continued growth. The company's raised outlook reflects confidence in its ability to maintain leadership in the outdoor living market and achieve long-term financial goals.

For further details on AZEK's financial performance and future prospects, interested parties are encouraged to join the upcoming conference call or visit the Investor Relations section on AZEK's website.

Explore the complete 8-K earnings release (here) from The AZEK Co Inc for further details.

This article first appeared on GuruFocus.