Quanex Building Products NYSE: NX reported third-quarter fiscal 2026 sales of $501.8 million, up 1.3% from $495.3 million a year earlier, as higher pricing offset the effects of tariff reimbursements to customers. The company said volumes were flat, pricing increased about 3%, and tariff refunds reduced revenue by approximately 2%.
Net income for the quarter ended July 31 totaled $26.5 million, or $0.58 per diluted share, compared with a net loss of $276 million, or $6.04 per diluted share, in the prior-year period. The 2025 loss primarily reflected a $302.3 million non-cash goodwill impairment tied to the company’s business resegmentation.
On an adjusted basis, Quanex posted net income of $36 million, or $0.79 per diluted share, compared with $31.6 million, or $0.69 per diluted share, a year earlier. Adjusted EBITDA rose to $72.7 million from $70.3 million.
Housing demand remains mixed
President and CEO George Wilson said the company continues to see an uneven housing backdrop in North America and Europe. U.S. single-family starts in July were running at an annualized rate of 808,000, down roughly 16% from a year earlier and the lowest monthly level since late 2022, he said. Single-family completions declined about 13% year over year, while units under construction fell roughly 7%.
Wilson said permits offered a more constructive signal. Total permits rose 3% year over year in July, single-family permits were modestly higher, and homes authorized but not yet started increased about 10%. He characterized the environment as “demand deferred rather than demand destroyed,” saying builders have maintained entitlement pipelines while delaying new construction starts.
In Europe, the company sees recovery emerging in new-build glazing and fenestration markets in Iberia and Scandinavia, while softness continues in the United Kingdom, Germany, France and Italy. Wilson said future recovery could be supported by improved consumer confidence and government-sponsored social-housing initiatives.
Quanex also said raw-material, energy, freight and logistics costs remain elevated, though the pace of inflation has moderated. The company implemented targeted price increases ranging from the mid-single digits to low teens during the third quarter and said it had meaningfully narrowed the gap between costs and pricing. Management said further changes in costs could require additional customer discussions or surcharges.
Segment results reflect pricing and inflation pressures
- Hardware Solutions: Revenue declined 2.7% to $220.9 million. Volumes were down about 0.5%, while pricing increased about 1.5%. Tariff reimbursements to customers reduced segment revenue by roughly 4%. Adjusted EBITDA increased to $27.1 million from $24.7 million, helped by pricing and the absence of operational issues at the company’s Monterrey, Mexico, facility that affected the prior-year quarter.
- Extruded Solutions: Revenue rose 2.8% to $179.3 million, with volumes down about 0.5% and pricing up nearly 3.5%. Adjusted EBITDA slipped to $35.6 million from $37.1 million as inflationary costs more than offset some of the pricing benefit.
- Custom Solutions: Revenue increased 8.5% to $111 million. Volumes grew about 3% and pricing rose about 5.5%. Adjusted EBITDA declined to $12 million from $12.9 million, primarily due to inflationary pressure.
During the question-and-answer session, Chief Financial Officer Scott Zuehlke said Hardware Solutions pricing contributed approximately $3.1 million to year-over-year adjusted EBITDA improvement. He said third-quarter pricing actions were phased in, meaning the company expects a fuller-quarter benefit in the fourth quarter.
Wilson said benefits from the company’s 80/20 operational initiatives were still minimal in the third quarter because projects are in their early stages. However, he said Quanex has begun taking actions to reduce selling, general and administrative costs and expects more meaningful benefits to develop during the fourth quarter and into the next fiscal year.
Cash flow supports debt reduction and share repurchases
Cash provided by operating activities was $58.6 million, compared with $60.7 million in the prior-year quarter. Free cash flow increased 3.5% to $47.8 million.
The company used its cash generation to repay $42.25 million of debt and repurchase $1.7 million of stock during the quarter. Liquidity was approximately $363 million as of July 31, up 10.5% from the preceding quarter. Its net debt-to-last-12-month adjusted EBITDA leverage ratio declined to 2.8 times.
Wilson said Quanex intends to continue prioritizing debt repayment and organic investments that generate returns. Longer term, he said the company expects to pursue growth in adjacent markets through organic and inorganic opportunities rather than seek a net-cash position.
Fourth-quarter outlook
For the fourth quarter of fiscal 2026, Quanex expects consolidated revenue growth of 2% to 3% from the year-earlier period and adjusted EBITDA margin expansion of 50 to 75 basis points. The company expects a tax rate of approximately 24%.
Zuehlke said the expected margin improvement should be weighted toward Hardware Solutions, reflecting the absence of the prior-year Monterrey disruption and the full-quarter effect of pricing actions. He also said the roughly $9 million revenue impact from tariff reimbursements in Hardware Solutions during the third quarter should be substantially smaller in the fourth quarter.
Management said it remains cautious on near-term market conditions while maintaining a positive long-term view of residential housing demand.
About Quanex Building Products (NYSE:NX)
Quanex Building Products Corporation engages in the design, manufacture and distribution of components for the window, door and building products industries in North America. The company operates through two primary segments: Window Products and Door & Building Products. Its Window Products segment supplies vinyl window profiles and related accessories, while its Door & Building Products segment offers engineered door skins, panels, siding products, specialty moldings and other exterior building components.
Within its Window Products segment, Quanex produces extrusion profiles used by window fabricators to assemble vinyl casement, double-hung, slider and picture windows.
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