CSW's first quarter results for 2025 saw continued revenue growth and record quarterly results for revenue, adjusted EBITDA, adjusted earnings per share, and adjusted net income, as emphasized by both CEO Joseph Armes and CFO James Perry. Management attributed the mixed performance to solid organic growth in Contractor Solutions, offset by softer demand and margin contraction in Specialized Reliability Solutions and Engineered Building Solutions. CEO Joseph Armes highlighted that higher freight expenses and integration costs from recent acquisitions, particularly in the Contractor Solutions segment, weighed on margins. CFO James Perry also noted that price increases implemented early in the year helped offset some cost pressures but could not fully counteract the impact of tariffs and changing product mix.
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CSW (CSWI) Q1 CY2025 Highlights:
- Revenue: $230.5 million vs analyst estimates of $232.8 million (9.3% year-on-year growth, 1% miss)
- Adjusted EPS: $2.24 vs analyst estimates of $2.22 (1.1% beat)
- Adjusted EBITDA: $59.76 million vs analyst estimates of $60.37 million (25.9% margin, 1% miss)
- Operating Margin: 20.3%, down from 22% in the same quarter last year
- Market Capitalization: $4.87 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions CSW’s Q1 Earnings Call
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Jon Tanwanteng (CJS Securities) asked about the ongoing impact of tariffs and whether cost increases had started to flow through results. CFO James Perry clarified that most tariff effects would be felt in future quarters and outlined steps to shift sourcing away from China where possible.
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Susan Maklari (Goldman Sachs) sought clarity on the magnitude and timing of pricing actions to offset tariffs. Perry responded that price increases are being implemented product by product and are intended to match tariff-driven costs, with full effects expected over the coming quarters.
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Sam Reed (Wells Fargo) questioned the variability in Aspen Manufacturing’s margin profile and how it will fluctuate seasonally. Perry indicated that margins could swing several hundred basis points around the 24% target, but more precise guidance would come as integration progresses.
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Jamie Cook (Truist Securities) asked about demand trends in April and May, and the sustainability of organic growth in Contractor Solutions. Perry noted that seasonality and weather patterns are influencing demand, but organic growth remains in line with long-term targets.
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Natalia Bak (Citigroup) inquired about the timeline for restoring Engineered Building Solutions margins to the 20% target. Perry stated that while some progress is expected as backlog quality improves, achieving this margin consistently may take additional time given ongoing cost challenges.
Catalysts in Upcoming Quarters
Looking ahead, key catalysts include (1) the successful integration and margin trajectory of Aspen Manufacturing, (2) evidence that pricing actions effectively offset tariff-related cost increases without dampening demand, and (3) improvement in backlog conversion and margin expansion within Specialized Reliability Solutions and Engineered Building Solutions. Execution on supply chain adjustments and further M&A activity will also be important to watch.
CSW currently trades at $305.10, down from $314.46 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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