Azek Co Exceeds Expectations in Q1 2024, Analyst Boosts Price Target

By Don Francis, Editor
February 8, 2024 7:03 AM UTC
Azek Co Exceeds Expectations in Q1 2024, Analyst Boosts Price Target

Stephens & Co.'s Trey Grooms raised their price target on Azek Co (NYSE: AZEK) by 25% from $40 to $50 on 2024/02/07. The analyst maintained their Strong Buy rating on the stock.

Azek Co, a leading manufacturer and seller of building products in the United States, reported a strong quarter, surpassing expectations in terms of both revenue growth and margins, according to Grooms. The company's first-quarter results exceeded estimates, leading to an optimistic outlook for the rest of the fiscal year.

Grooms highlighted several factors that contributed to management's boosted guidance for FY 2024. These factors include the impressive performance in Q1, expected strong demand in Q2, and minimal changes anticipated in the first half of the year. Grooms noted that there is potential for further progress if sell-through growth continues to stay in the double digits throughout the year.

For Q1 2024, Azek Co reported impressive financial results. The company's earnings per share (EPS) of $0.10 surpassed the Zacks Consensus Estimate of $0.05 and showed a significant improvement compared to Q1 2023's $(0.09). Additionally, the company reported revenue of $240.44 million, beating the Zacks Consensus Estimate by 2.70% and showing an 11% increase compared to Q1 2023's $216.26 million. The company's EBITDA also saw a substantial year-over-year increase of 269%, reaching $55.7 million.

Looking ahead, Azek Co provided guidance for Q2 2024 and FY 2024. For Q2 2024, the company expects revenue in the range of $407 million to $413 million and EBITDA between $108 million and $112 million. For the full fiscal year, management anticipates revenue between $1.385 billion and $1.425 billion, with EBITDA projected to be in the range of $353 million to $372 million.

CEO Jesse Singh expressed optimism about the company's performance in Q1, attributing it to double-digit residential sell-through growth driven by material conversion, execution of recent shelf space gains, and contribution from new product innovations. Singh also highlighted that the company ended Q1 with channel inventory levels below historical averages and ample manufacturing capacity to effectively serve customers. Additionally, positive momentum is expected from recent shelf space negotiations and new product innovations for the 2024 season. Singh emphasized that the raised FY 2024 outlook is driven by Q1 results and increased visibility and confidence in margin drivers. The company remains focused on executing growth and productivity initiatives to drive above-market growth and margin expansion in FY 2024 and beyond.

In addition to Trey Grooms' rating and price target update, other analysts also updated their ratings on AZEK on 2024/02/07. RBC Capital's Mike Dahl raised the price target by 14%, from $43 to $49, and maintained a Buy rating on the stock. Truist Securities' Keith Hughes raised the price target by 20%, from $40 to $48, and maintained a Strong Buy rating.

Currently, 81.8% of top-rated analysts rate AZEK as a Strong Buy or Buy, while 18.2% consider it a Hold. No analysts recommend or strongly recommend selling the stock.

Since Azek Co's latest quarterly report on 2024/02/06, the company's stock price has increased by 14.5%. Year-over-year, the stock has seen a significant increase of 74.2%. During this period, AZEK has outperformed the S&P 500, which has shown a 20% increase.

Trey Grooms, the analyst who updated the rating and price target, is ranked in the top 2% out of 4,468 Wall Street analysts by WallStreetZen. Grooms specializes in the Basic Materials, Industrials, and Consumer Cyclical sectors, with an average return of 34.5% and a 76.5% win rate.

Azek Co, formerly known as CPG Newco LLC, was founded in 2013 and is based in Chicago, Illinois. The company manufactures and sells a wide range of building products for residential, commercial, and industrial markets in the United States. Its product portfolio includes trims, decks, porches, moldings, rails, pavers, bathroom and locker systems, as well as extruded plastic sheet products and other non-fabricated products for special applications in industrial markets.

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