Worthington (WOR)

Diversified industrial manufacturing company Worthington (NYSE:WOR) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 18% year on year to $303.7 million. Its non-GAAP profit of $0.74 per share was 5.4% above analysts’ consensus estimates.

Company Overview

Founded by a steel salesman, Worthington (NYSE:WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets.

Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors in the metals manufacturing industry include Nucor Corporation (NYSE:NUE), Steel Dynamics (NASDAQ:STLD), and Reliance Steel & Aluminum (NYSE:RS).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Worthington’s demand was weak and its revenue declined by 16.2% per year. This was below our standards and suggests it’s a low quality business.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Worthington’s recent performance shows its demand remained suppressed as its revenue has declined by 26.2% annually over the last two years.

Worthington also breaks out the revenue for its most important segments, Consumer Products and Building Products, which are 39.2% and 60.8% of revenue. Over the last two years, Worthington’s Consumer Products revenue (cylinders, torches, balloon kits, tools) averaged 4% year-on-year declines. On the other hand, its Building Products revenue (refrigerant, cylinders, tanks) averaged 4% growth.

This quarter, Worthington reported year-on-year revenue growth of 18%, and its $303.7 million of revenue exceeded Wall Street’s estimates by 1.4%.

Looking ahead, sell-side analysts expect revenue to grow 10.4% over the next 12 months, an improvement versus the last two years. This projection is admirable and suggests its newer products and services will spur better top-line performance.

Worthington has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 17.3% gross margin over the last five years. Said differently, Worthington had to pay a chunky $82.68 to its suppliers for every $100 in revenue.

In Q3, Worthington produced a 27.1% gross profit margin, up 2.8 percentage points year on year. Worthington’s full-year margin has also been trending up over the past 12 months, increasing by 4.9 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Worthington was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.9% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Worthington’s operating margin decreased by 9 percentage points over the last five years. Worthington’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Worthington generated an operating margin profit margin of 3%, up 4.9 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Worthington’s EPS grew at an unimpressive 5.9% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 16.2% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

We can take a deeper look into Worthington’s earnings to better understand the drivers of its performance. A five-year view shows that Worthington has repurchased its stock, shrinking its share count by 8.9%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Worthington, its two-year annual EPS declines of 27.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Worthington reported adjusted EPS of $0.74, up from $0.50 in the same quarter last year. This print beat analysts’ estimates by 5.4%. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Worthington has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.4% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Worthington’s margin expanded by 12 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Worthington’s free cash flow clocked in at $27.87 million in Q3, equivalent to a 9.2% margin. The company’s cash profitability regressed as it was 3.1 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because capital expenditures can be seasonal and companies often stockpile inventory in anticipation of higher demand, causing short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Worthington historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1.6%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Worthington’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Worthington reported $167.1 million of cash and $346.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $155.7 million of EBITDA over the last 12 months, we view Worthington’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $1.66 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its . Overall, we think this was a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 3.1% to $58.38 immediately following the results.

Updated: December 4, 2025 at 10:31 PM EST

Before deciding whether to buy Worthington or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We see the value of companies helping their customers, but in the case of Worthington, we’re out. To kick things off, its revenue has declined over the last five years. And while its rising cash profitability gives it more optionality, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Worthington’s P/E ratio based on the next 12 months is 15x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $68.20 on the company (compared to the current share price of $55.15).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.