WOR Q4 Deep Dive: Volume Growth and Acquisitions Offset Margin Pressures

Diversified industrial manufacturing company Worthington (NYSE:WOR) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 19.5% year on year to $327.5 million. Its non-GAAP profit of $0.65 per share was 7.7% below analysts’ consensus estimates.

Is now the time to buy WOR? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Worthington’s fourth quarter saw revenue growth outpace analysts’ expectations, but non-GAAP earnings per share fell short of consensus. Management highlighted that strong sales were driven by higher volumes in Building Products and the inclusion of the Elgen acquisition. CEO Joseph Hayek noted, “Our innovation around large ASME water tanks that help cool data centers has led to increasing opportunities and several new orders.” The company also experienced margin pressures from higher conversion costs and temporary limitations in Elgen’s operations, which impacted consolidated results. Management remained focused on cost controls and operational improvements to offset the impact of mixed market conditions and a cautious consumer environment.

Looking forward, management’s guidance is shaped by anticipated benefits from recent acquisitions, ongoing product innovation, and expected improvements in operational efficiency. Hayek emphasized the company’s strategic focus on integrating niche acquisitions like LSI and leveraging the Worthington Business System for value creation. CFO Colin Souza indicated that headcount investments and modernization projects are expected to contribute to margin improvement in the coming quarters. Management acknowledged ongoing tariff impacts but stated, “We believe we’ve gained share in multiple value streams,” and expressed confidence in mitigating cost pressures through supplier negotiations, operational efficiencies, and pricing actions.

Key Insights from Management’s Remarks

Management attributed the quarter’s sales growth to increased market share, contributions from recent acquisitions, and new product introductions, while also noting that margin pressures stemmed from operational challenges in newly acquired businesses and ongoing investments.

• Acquisition integration impact: The addition of Elgen drove sales growth but temporarily constrained margins due to operational resets, including safety enhancements and new equipment installations. Management expects these changes to position Elgen for profitable growth as productivity improves.
• Pending LSI acquisition: Worthington plans to acquire LSI, a leader in metal roofing components, to strengthen its engineered building systems portfolio. Management sees LSI’s resilient end-market exposure and high margin profile as additive to long-term profitability, with the deal expected to close in January 2026.
• Data center exposure expanding: The company’s innovation in large-format water tanks and HVAC components is opening more opportunities in data center infrastructure, which, while currently less than 10% of segment sales, is among the fastest-growing areas.
• Consumer Products resilience: The celebrations category, including Balloon Time products, gained new national retail placements such as Costco, with innovation and affordability helping offset broader consumer caution and drive share gains.
• SG&A discipline: SG&A expenses declined as a percentage of sales, reflecting technology-driven cost controls and ongoing transformation initiatives. Management aims to further reduce SG&A and achieve gross margins of 30% over time, despite temporary cost headwinds.

Drivers of Future Performance

Worthington’s outlook is built on leveraging recent acquisitions, expanding into high-growth segments, and executing on cost efficiency as it navigates mixed market and tariff environments.

• Acquisition-driven growth: Management expects the integration of LSI and ongoing improvements at Elgen to drive both sales and margin expansion, with a focus on deploying the Worthington Business System to accelerate post-acquisition value creation. The company anticipates these moves will increase its exposure to resilient, retrofit-driven end markets.
• Cost and margin management: Operational investments in headcount and modernization are set to yield productivity gains and offset conversion cost pressures. Management is targeting SG&A as a percentage of sales to trend toward 20% and gross margins to approach 30% over time, though tariffs and seasonal shifts remain ongoing considerations.
• Innovation and share gains: The pipeline of new products—especially those supporting data center cooling and environmentally friendly refrigerants—positions Worthington for organic growth and additional market share, particularly as demand improves in the construction and consumer sectors.

Catalysts in Upcoming Quarters

Over the next few quarters, the StockStory team will watch (1) the integration and performance of the LSI acquisition and its effect on margin trends, (2) margin recovery at Elgen as operational enhancements materialize, and (3) continued penetration of new products in data center and retail markets. Execution on SG&A reduction and gross margin improvement will also be important signposts for sustained growth.

Worthington currently trades at $52.42, down from $55.25 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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