JELD-WEN (JELD)

Building products manufacturer JELD-WEN (NYSE:JELD) reported Q1 CY2025 results exceeding the market’s revenue expectations, but sales fell by 19.1% year on year to $776 million. Its non-GAAP loss of $0.17 per share was 10.2% above analysts’ consensus estimates.

Company Overview

Founded in the 1960s as a general wood-making company, JELD-WEN (NYSE:JELD) manufactures doors, windows, and other related building products.

Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.

Competitors offering door and window building materials include Masonite (NYSE:DOOR), and private companies Pella and Ply Gem.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, JELD-WEN’s demand was weak and its revenue declined by 3.3% per year. This wasn’t a great result and is a sign of poor business quality.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. JELD-WEN’s recent performance shows its demand remained suppressed as its revenue has declined by 11.4% annually over the last two years.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, JELD-WEN’s organic revenue averaged 12% year-on-year declines. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, JELD-WEN’s revenue fell by 19.1% year on year to $776 million but beat Wall Street’s estimates by 0.8%.

Looking ahead, sell-side analysts expect revenue to decline by 7.3% over the next 12 months. Although this projection is better than its two-year trend, it's tough to feel optimistic about a company facing demand difficulties.

JELD-WEN has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 19.5% gross margin over the last five years. Said differently, JELD-WEN had to pay a chunky $80.49 to its suppliers for every $100 in revenue.

JELD-WEN produced a 14.4% gross profit margin in Q1, marking a 3.5 percentage point decrease from 18% in the same quarter last year. JELD-WEN’s full-year margin has also been trending down over the past 12 months, decreasing by 2 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and 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.

JELD-WEN was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.6% 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, JELD-WEN’s operating margin decreased by 12.5 percentage points over the last five years. JELD-WEN’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 Q1, JELD-WEN generated an operating profit margin of negative 22.1%, down 19.2 percentage points year on year. Since JELD-WEN’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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.

Sadly for JELD-WEN, its EPS declined by 18% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

We can take a deeper look into JELD-WEN’s earnings to better understand the drivers of its performance. As we mentioned earlier, JELD-WEN’s operating margin declined by 12.5 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

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 JELD-WEN, its two-year annual EPS declines of 49.7% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, JELD-WEN reported EPS at negative $0.17, down from $0.21 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects JELD-WEN’s full-year EPS of $0.40 to grow 51.9%.

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.

JELD-WEN has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.1%, lousy for an industrials business.

Taking a step back, we can see that JELD-WEN’s margin dropped by 10.5 percentage points during that time. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s in the middle of a big investment cycle.

JELD-WEN burned through $120.3 million of cash in Q1, equivalent to a negative 15.5% margin. The company’s cash burn increased from $45.7 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

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).

JELD-WEN historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 0.7%, 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, JELD-WEN’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

JELD-WEN burned through $142.1 million of cash over the last year, and its $1.28 billion of debt exceeds the $132.5 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the JELD-WEN’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of JELD-WEN until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly JELD-WEN blew past analysts’ organic revenue expectations this quarter. We were also glad its EPS and EBITDA outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives, but shares traded down 6.3% to $5.25 immediately after reporting.

Updated: July 9, 2025 at 11:20 PM EDT

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We cheer for all companies making their customers lives easier, but in the case of JELD-WEN, we’ll be cheering from the sidelines. To kick things off, its revenue has declined over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, 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.

JELD-WEN’s P/E ratio based on the next 12 months is 7.4x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $3.98 on the company (compared to the current share price of $4.49).