CSW Industrials (CSW) reported $232.99 million in revenue for the quarter ended December 2025, representing a year-over-year increase of 20.3%. EPS of $1.42 for the same period compares to $1.48 a year ago.The reported revenue represents a surprise of -6.56% over the Zacks Consensus Estimate of $249.36 million. With the consensus EPS estimate being $1.93, the EPS surprise was -26.43%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to ...

Core Viewpoint - CSW Industrials reported quarterly earnings of $1.42 per share, missing the Zacks Consensus Estimate of $1.93 per share, representing a -26.43% earnings surprise [1]. Financial Performance - The company posted revenues of $232.99 million for the quarter ended December 2025, missing the Zacks Consensus Estimate by 6.56%, compared to $193.65 million in revenues a year ago [2]. - Over the last four quarters, CSW Industrials has surpassed consensus EPS estimates three times [2]. Stock Performance - CSW Industrials shares have increased by approximately 2.2% since the beginning of the year, outperforming the S&P 500's gain of 1.9% [3]. - The current consensus EPS estimate for the upcoming quarter is $2.67, with expected revenues of $285.73 million, and for the current fiscal year, the estimate is $10.36 on $1.08 billion in revenues [7]. Industry Outlook - The Zacks Industry Rank for Chemical - Specialty is currently in the bottom 21% of over 250 Zacks industries, indicating potential challenges for stock performance [8]. - The performance of CSW Industrials may be influenced by the overall outlook for the industry, as empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions [5][8].

Financial Performance - Total revenue for fiscal Q3 2026 reached a record $233.0 million, a 20.3% increase compared to the prior year period[5] - Adjusted EBITDA for fiscal Q3 2026 increased 6.6% to a record $44.8 million, with an adjusted EBITDA margin of 19.2%, down from 21.7% in the prior year[12] - Net income attributable to CSW decreased 61.9% to $10.3 million, with EPS of $0.62, a decrease of 61.3% compared to $1.60 in the prior year[11] - Year-to-date revenue for fiscal 2026 was $773.6 million, representing a 19.4% growth from $647.8 million in the prior year[21] - For the three months ended December 31, 2025, consolidated revenue was $232,992,000, an increase from $193,649,000 in the same period of 2024, representing a growth of 20.3%[64] - For the nine months ended December 31, 2025, consolidated revenue was $773,589,000, up from $647,752,000 in 2024, indicating a year-over-year increase of 19.4%[69] Segment Performance - Contractor Solutions segment revenue increased 27.1% to $168.0 million, driven by $42.7 million in inorganic growth from acquisitions[17] - Specialized Reliability Solutions segment revenue grew 10.8% to $38.3 million, with organic growth of 4.0% and inorganic growth of 6.8%[18] - Contractor Solutions segment revenue increased by $121.8 million or 27.0% year-over-year, driven by $148.2 million from acquisitions[33] - Specialized Reliability Solutions segment revenue grew to $113.9 million, a 3.6% increase from the prior year period[34] - Engineered Building Solutions segment revenue was $92.3 million, with a 21.1% decrease in operating income to $12.2 million[35] - Reported revenue for the Contractor Solutions Segment for the three months ended December 31, 2025, was $167,999, compared to $132,150 in 2024, reflecting strong growth[60] Cash Flow and Investments - Free cash flow for fiscal Q3 2026 was $22.7 million, an increase of $15.0 million compared to the prior year period[14] - The company invested approximately $1.0 billion in acquisitions and $12.1 million in organic capital expenditures year-to-date[5] - Fiscal 2026 year-to-date, the Company deployed approximately $1.0 billion in acquisitions and $12.1 million in organic capital expenditures, while returning $106.2 million to shareholders through share repurchases and dividends[31] - Cash flows from operating activities for the nine months ended December 31, 2025, were $151,335, an increase of 7.7% from $141,069 in 2024[53] - Net cash used in investing activities for the nine months ended December 31, 2025, was $1,012,136, significantly higher than $97,539 in 2024, primarily due to cash paid for acquisitions[53] - Net cash provided by financing activities for the nine months ended December 31, 2025, was $675,492, compared to $148,884 in 2024, driven by increased borrowings[53] Debt and Leverage - The Company reported a net debt of $764.2 million, resulting in a net Debt-to-EBITDA leverage ratio of 2.3x[30] - The Company ended the quarter with $200.1 million outstanding on the revolving line of credit and $600.0 million Term Loan A[30] - The company has entered into a three-year syndicated interest rate hedge to lock in the SOFR rate at 3.416% for the first $300.0 million borrowing under the Term Loan A[30] Tax and Income - The effective tax rate for the fiscal year-to-date was 21.4%, compared to 23.3% in the prior year-to-date period[32] - The effective tax rate for the nine months ended December 31, 2025, was 21.4%, down from 23.3% in 2024[57] - Adjusted net income attributable to CSW for the nine months ended December 31, 2025, was $121,516, an increase of 5.9% from $114,718 in 2024[56] - Adjusted EBITDA for the nine months ended December 31, 2025, was $186,492, representing 24.1% of revenue, compared to 26.0% in 2024[63] Operating Expenses - Operating expenses as a percentage of revenue were 32.2%, up from 26.1% in the prior year, reflecting increased costs related to acquisitions[8] - Adjusted Operating Income for the nine months ended December 31, 2025, was $139,083,000, which is 18.0% of revenue, compared to $137,064,000 or 21.2% of revenue for the same period in 2024[69] - Operating income for the three months ended December 31, 2025, was $17,338,000, which is 7.4% of revenue, down from $29,595,000 or 15.3% of revenue in 2024[64] Other Financial Metrics - The company reported a significant increase in accounts receivable, totaling $44,460 for the nine months ended December 31, 2025, compared to $32,316 in 2024[53] - Capital expenditures for the nine months ended December 31, 2025, were $12,130, slightly higher than $11,735 in 2024, indicating ongoing investment in operations[53] - Nonrecurring inventory write-downs amounted to $2,051,000 for the three months ended December 31, 2025[64] - Depreciation and amortization for the three months ended December 31, 2025, totaled $19,058,000, compared to $11,012,000 for the same period in 2024[65] - The company incurred acquisition-related integration expenses of $3,944,000 for the three months ended December 31, 2025[64]

Revenue Growth - Net revenues for the three months ended December 31, 2025 increased by $39.3 million, or 20.3%, compared to the same period in 2024, primarily due to acquisitions contributing $45.0 million [129]. - For the nine months ended December 31, 2025, net revenues increased by $125.8 million, or 19.4%, primarily due to acquisitions contributing $150.6 million [130]. - For the three months ended December 31, 2025, net revenues increased by $35.8 million, or 27.1%, compared to the same period in 2024, primarily due to acquisitions [149]. - For the nine months ended December 31, 2025, net revenues increased by $121.8 million, or 27.0%, compared to the same period in 2024, mainly driven by acquisitions [150]. - The Specialized Reliability Solutions segment's net revenues for the three months ended December 31, 2025, increased by $3.7 million, or 10.8%, compared to the same period in 2024 [155]. - The Engineered Building Solutions segment's net revenues for the three months ended December 31, 2025, decreased by $0.4 million, or 1.3%, compared to the same period in 2024 [160]. Profitability - Gross profit for the three months ended December 31, 2025 increased by $12.3 million, or 15.4%, but the gross profit margin decreased to 39.7% from 41.4% due to increased tariffs and material costs [131]. - Gross profit for the nine months ended December 31, 2025 increased by $35.6 million, or 12.2%, with a gross profit margin of 42.3%, down from 45.0% [132]. - Operating income for the three months ended December 31, 2025 decreased by $12.3 million, or 41.4%, due to higher operating expenses despite increased gross profit [135]. - Operating income for the nine months ended December 31, 2025 decreased by $7.2 million, or 5.3%, despite an increase in gross profit [136]. - Operating income for the three months ended December 31, 2025, decreased by $10.0 million, or 37.2%, compared to the same period in 2024, attributed to increased tariffs and acquisition-related costs [151]. - The Contractor Solutions segment's operating margin for the three months ended December 31, 2025, was 10.0%, down from 20.2% in the same period in 2024 [151]. - Operating income for the Specialized Reliability Solutions segment for the three months ended December 31, 2025, decreased by $0.7 million, or 13.7%, compared to the same period in 2024 [157]. Operating Expenses - Operating expenses for the three months ended December 31, 2025 rose by $24.6 million, or 48.7%, attributed to the inclusion of recent acquisitions and related expenses, leading to an increase in operating expenses as a percentage of revenues to 32.2% [133]. - Operating expenses for the nine months ended December 31, 2025 increased by $42.9 million, or 27.6%, with operating expenses as a percentage of revenues rising to 25.6% [134]. Cash Flow and Investments - Cash provided by operating activities for the nine months ended December 31, 2025, was $151.3 million, compared to $141.1 million for the same period in 2024 [166]. - Cash flows used in investing activities for the nine months ended December 31, 2025 were $1,012.1 million, a significant increase from $97.5 million for the same period in 2024 [167]. - Cash flows provided by financing activities during the nine months ended December 31, 2025 were $675.5 million, compared to $148.9 million in 2024 [168]. - Capital expenditures for the nine months ended December 31, 2025 were $12.1 million, slightly up from $11.7 million in 2024, focusing on capacity expansion and new product introductions [169]. - The company acquired MARS Parts for $667.5 million, including $650.0 million in cash, during the nine months ended December 31, 2025 [169]. - The company also acquired Aspen Manufacturing for $327.6 million, including $313.5 million in cash, during the same period [169]. - Net borrowings on the Revolving Credit Facility and TLA were $800.1 million for the nine months ended December 31, 2025, compared to $(166.0) million in 2024 [175]. - Share repurchases amounted to $92.6 million during the nine months ended December 31, 2025, up from $13.7 million in 2024 [175]. Tax and Compliance - The effective tax rate for the three months ended December 31, 2025 was (34.2)%, with net income tax benefits of $2.7 million recognized from operations before taxes of $7.9 million [139]. - The company expects $6.4 million of reserves for unrecognized tax positions (UTPs) to either be settled or expire within the next 12 months [143]. - As of December 31, 2025, the UTP accrual related to TRUaire's pre-acquisition tax periods was $8.5 million, including penalties and interests accrued post-acquisition [140]. - The company remains compliant with all covenants related to its indebtedness as of December 31, 2025 [171]. Foreign Currency Impact - The company recognized a foreign currency transaction net gain of $0.8 million for the nine months ended December 31, 2025, compared to $0.1 million in 2024 [183]. - A 10% change in foreign currency exchange rates would have impacted net earnings by approximately 5% for the nine months ended December 31, 2025 [184].

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Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with CSW Industrials identified as a strong candidate due to its favorable growth metrics and Zacks Rank [1][2]. Group 1: Earnings Growth - CSW Industrials has a historical EPS growth rate of 24.8%, with projected EPS growth of 23.7% for the current year, significantly outperforming the industry average of 6.4% [4]. Group 2: Cash Flow Growth - The company exhibits a year-over-year cash flow growth of 22.8%, surpassing many peers and the industry average of 6.1% [5]. - Over the past 3-5 years, CSW Industrials has maintained an annualized cash flow growth rate of 23.2%, compared to the industry average of 5.9% [6]. Group 3: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for CSW Industrials, with the Zacks Consensus Estimate for the current year increasing by 0.5% over the past month [7]. Group 4: Overall Positioning - CSW Industrials holds a Growth Score of B and a Zacks Rank of 2, indicating strong potential for outperformance in the growth stock category [8][9].

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, particularly in the financial sector, to achieve exceptional returns, although identifying such stocks can be challenging due to inherent volatility and risks [1] Group 1: Company Overview - CSW Industrials is currently highlighted as a recommended growth stock by the Zacks Growth Style Score system, which evaluates a company's genuine growth prospects beyond traditional metrics [2] - The company has a favorable Growth Score and a top Zacks Rank, indicating strong potential for growth [2] Group 2: Earnings Growth - CSW Industrials has a historical EPS growth rate of 24.8%, with projected EPS growth of 23.7% for the current year, significantly outperforming the industry average of 6% [4] Group 3: Cash Flow Growth - The year-over-year cash flow growth for CSW Industrials stands at 22.8%, which is substantially higher than the industry average of 6% [5] - Over the past 3-5 years, the company's annualized cash flow growth rate has been 23.2%, compared to the industry average of 5.3% [6] Group 4: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for CSW Industrials, with the current-year earnings estimates increasing by 0.5% over the past month [7] Group 5: Investment Positioning - CSW Industrials has achieved a Growth Score of B and a Zacks Rank of 2, positioning it well for potential outperformance in the growth stock category [8]

Core Insights - CSW Industrials reported quarterly earnings of $2.96 per share, exceeding the Zacks Consensus Estimate of $2.73 per share, and showing an increase from $2.26 per share a year ago, resulting in an earnings surprise of +8.42% [1] - The company achieved revenues of $276.95 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.19% and up from $227.93 million year-over-year [2] Earnings Performance - CSW Industrials has surpassed consensus EPS estimates in all four of the last quarters [2] - The company has topped consensus revenue estimates two times over the last four quarters [2] Stock Performance - CSW Industrials shares have declined approximately 30.8% since the beginning of the year, contrasting with the S&P 500's gain of 17.2% [3] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, including current consensus earnings expectations for upcoming quarters [4] - The current consensus EPS estimate for the next quarter is $2.36 on revenues of $252 million, and for the current fiscal year, it is $10.35 on revenues of $1.05 billion [7] Industry Context - The Chemical - Specialty industry, to which CSW Industrials belongs, is currently ranked in the bottom 34% of over 250 Zacks industries, indicating potential challenges ahead [8]

Financial Performance - Total revenue for fiscal 2026 second quarter reached a record $277.0 million, a 21.5% increase compared to the prior year period[5] - Net income attributable to CSW for the second quarter was $40.7 million, reflecting a 12.8% increase from $36.1 million in the prior year[5] - Adjusted EBITDA for the second quarter grew 19.9% to a record $72.9 million, with an adjusted EBITDA margin of 26.3%[12] - Total revenue for the first half of fiscal 2026 was $540.6 million, representing a 19.0% growth from $454.1 million in the prior year[23] - Adjusted EPS for the second quarter increased 15.2% to $2.96 per diluted share, compared to $2.57 in the prior year[11] - Operating income for the second quarter was $56.8 million, with an operating income margin of 20.5%[9] - Total revenues for the six months ended September 30, 2025, were $540.6 million, compared to $454.1 million for the same period in 2024, reflecting a growth of 19.0%[49] - Net income attributable to CSW Industrials, Inc. for the six months ended September 30, 2025, was $81.6 million, compared to $74.6 million in the prior year, an increase of 9.5%[49] - The diluted earnings per share for the six months ended September 30, 2025, was $4.84, compared to $4.73 in 2024, reflecting a 2.3% increase[59] Segment Performance - Contractor Solutions segment revenue increased by $86.0 million or 26.9% to $405.2 million, with inorganic growth from acquisitions contributing $105.6 million or 33.1% of this growth[33] - Segment operating income for Contractor Solutions was $106.1 million, with an adjusted operating income of $107.7 million, compared to $96.1 million in the prior year[33] - Specialized Reliability Solutions segment revenue grew to $75.6 million, a slight increase of $0.3 million or 0.4% from the prior year[34] - Segment operating income for Specialized Reliability Solutions decreased to $10.3 million, representing 13.7% of revenue, down from 17.2% in the prior year[34] - Engineered Building Solutions segment revenue was $63.8 million, a $0.2 million or 0.4% increase, while operating income decreased by 25.2% to $8.8 million[36] - The Contractor Solutions Segment reported revenue of $208,468,000 for the three months ended September 30, 2025, a 31.3% increase from $158,834,000 in 2024[64] Cash Flow and Investments - Cash flows from operations for the second quarter were $61.8 million, a decrease from $67.4 million in the prior year[13] - Cash flows from operating activities for the six months ended September 30, 2025, totaled $122,467,000, slightly down from $130,169,000 in 2024[54] - The company reported a net cash used in investing activities of $331,439,000 for the six months ended September 30, 2025, compared to $41,349,000 in 2024, primarily due to cash paid for acquisitions[54] - The company’s cash and cash equivalents at the end of the period were $31,471,000, a significant decrease from $273,220,000 at the end of the same period in 2024[54] Debt and Taxation - The company paid down $35.0 million of debt in the quarter, resulting in a net leverage ratio of 0.12x[5] - The effective tax rate for the fiscal second quarter was 26.4%, slightly up from 26.1% in the prior year[16] - The company’s effective tax rate for the six months ended September 30, 2025, was 25.4%, consistent with 26.2% in 2024[61] Capital Expenditures and Depreciation - Capital expenditures for the six months ended September 30, 2025, were $5,984,000, down from $8,587,000 in 2024[54] - Depreciation and amortization for the three months ended September 30, 2025, totaled $14,392,000, compared to $9,951,000 in the same period of 2024[69] Acquisition Activity - The company announced a definitive agreement to acquire MARS Parts for $650 million, expected to close in November 2025[17] Adjusted Metrics - Adjusted net income attributable to CSW for the six months ended September 30, 2025, was $97,883,000, up 15.9% from $84,304,000 in 2024[59] - Adjusted EBITDA for the six months ended September 30, 2025, reached $141,681,000, representing a 12.3% increase from $126,075,000 in 2024[66] - Adjusted EBITDA for Contractor Solutions was $132.6 million, or 32.7% of revenue, down from $112.0 million or 35.1% in the prior year[33] - Adjusted free cash flow for the three months ended September 30, 2025, was $58,746,000, which is 80.5% of adjusted EBITDA[73]

Revenue and Acquisitions - Net revenues for the three months ended September 30, 2025 increased by $49.0 million, or 21.5%, compared to the same period in 2024, primarily due to acquisitions[112] - Acquisitions of Aspen Manufacturing, PSP Products, and PF WaterWorks contributed $61.9 million, or 27.2%, to the revenue increase for the three months ended September 30, 2025[112] - Net revenues for the three months ended September 30, 2025 increased by $49.6 million, or 31.2%, compared to the same period in 2024, primarily driven by acquisitions[129] - The Contractor Solutions segment reported net revenues of $405.2 million for the six months ended September 30, 2025, up from $319.3 million in 2024, reflecting a 26.9% increase[130] Profitability and Operating Income - Gross profit for the three months ended September 30, 2025 increased by $15.3 million, or 14.7%, with a gross profit margin of 43.0%, down from 45.6% in the same period of 2024[114] - Operating income for the three months ended September 30, 2025 was $51.5 million, with an operating margin of 20.5%, compared to 22.6% in the same period of 2024[118] - Operating income for the three months ended September 30, 2025 increased by $7.1 million, or 15.4%, but the operating margin decreased to 25.6% from 29.1% due to increased tariffs and recent acquisitions[131] - The Specialized Reliability Solutions segment's operating income for the six months ended September 30, 2025 decreased by $2.6 million, or 20.3%, compared to the same period in 2024[138] - The Engineered Building Solutions segment's operating income for the six months ended September 30, 2025 decreased by $3.0 million, or 25.2%, due to increased material costs and warranty expenses[143] Expenses and Cash Flow - Operating expenses for the three months ended September 30, 2025 rose by $10.1 million, or 19.2%, primarily due to the inclusion of recent acquisitions[116] - Cash provided by operating activities for the six months ended September 30, 2025 was $122.5 million, a decrease from $130.2 million in the same period of 2024[146] - Cash flows used in investing activities increased significantly to $331.4 million for the six months ended September 30, 2025, compared to $41.3 million in 2024, primarily due to the acquisition of Aspen Manufacturing[147] - Dividend payments increased to $9.1 million for the six months ended September 30, 2025, compared to $6.5 million in 2024[150] Tax and Financial Position - The effective tax rate for the three months ended September 30, 2025 was 26.4%, with income taxes provided amounting to $14.7 million on earnings of $55.5 million before taxes[122] - The company expects to maintain a strong balance sheet in fiscal year 2026, focusing on organic growth, strategic acquisitions, and returning cash to shareholders[109] - The company has a history of successful acquisitions and remains focused on identifying additional opportunities in core end markets[106] Market Risks and Currency Exposure - The company is actively assessing and implementing mitigation options in response to increased tariffs and geopolitical tensions affecting its operations[107] - The company has $60.0 million in unhedged variable rate indebtedness with an average interest rate of 5.4%[160] - A quarter point change in interest rates would result in a change of approximately $0.2 million in annual interest expense[160] - The company recognized a foreign currency transaction net gain of $0.6 million for the six months ended September 30, 2025[163] - A 10% change in foreign currency exchange rates would have impacted net earnings by approximately 4%[164] - The company realized a net loss associated with foreign currency translation of $(0.6) million for the six months ended September 30, 2024[163] - The company conducts an immaterial portion of operations outside the U.S., primarily in local currencies such as the Australian dollar and British pound[163] - The company entered into an interest rate swap to hedge $100.0 million borrowing under its Revolving Credit Facility[160] - The company is exposed to market risks from changes in interest rates and foreign currency exchange rates[159] Regulatory and Forward-Looking Statements - The company monitors domestic and international regulatory developments relevant to its manufacturing and distribution operations[165] - The company assumes no obligation to update or revise forward-looking statements except as required by law[158] Stock Listing - The company transferred its common stock listing from Nasdaq to the New York Stock Exchange on June 9, 2025[108]