Kissimmee Facility Upgrades And Automation Will Improve Efficiency

Key Takeaways

• JELD-WEN is enhancing production capabilities and collaborating with builders to improve product quality and reduce costs, supporting future revenue growth.
  
• Transformation initiatives and automation investments aim to enhance operational efficiency and net margins by reducing costs and reliance on direct labor.
  
• Declining demand and productivity challenges, alongside tariff impacts and high debt leverage, suggest financial strain and uncertain future profitability for JELD-WEN Holding.

Catalysts

Designs, manufactures, and sells wood, metal, and composite materials doors, windows, and related building products in North America and Europe.

• JELD-WEN is actively enhancing production capabilities, such as at the Kissimmee, Florida facility, aiming to improve product quality and lead times, which could support future revenue growth.
  
• The company is focused on expanding its market share among new home builders by collaborating with builders to reduce costs, potentially boosting revenue in the new construction segment.
  
• JELD-WEN is undertaking transformation initiatives, expected to achieve $100 million in ongoing benefits, which could enhance EBITDA and net margins for the latter half of the year.
  
• The company is optimizing its manufacturing and distribution network for long-term operational efficiency, which could improve net margins by reducing costs.
  
• JELD-WEN is investing in automation to drive efficiency and reduce costs, potentially improving net margins by reducing reliance on direct labor and increasing production efficiency.

JELD-WEN Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming JELD-WEN Holding's revenue will decrease by 3.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -9.7% today to 1.4% in 3 years time.
• Analysts expect earnings to reach $45.8 million (and earnings per share of $0.8) by about May 2028, up from $-350.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $86.6 million in earnings, and the most bearish expecting $39.2 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.8x on those 2028 earnings, up from -1.0x today. This future PE is lower than the current PE for the US Building industry at 21.3x.
• Analysts expect the number of shares outstanding to decline by 0.8% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

JELD-WEN Holding Future Earnings Per Share Growth

Risks

• Declining demand and double-digit volume decreases in North America and Europe have led to significant revenue drops, indicating a challenging environment ahead, impacting future revenue growth.
  
• The withdrawal of full-year guidance due to market volatility and uncertainties, including tariffs, highlights the unpredictability affecting both revenues and earnings stability.
  
• The ongoing productivity headwinds and inability to reduce costs at a necessary pace to offset lower demand pressures could lead to lower net margins and profitability.
  
• Increased net debt leverage to 4.6x, above the target range, due to lower EBITDA, suggests financial strain and raises concerns about earnings and financial resilience.
  
• The impact of tariffs is estimated at $30 million for 2025; while the company plans to pass this onto customers, potential demand implications pose risks to both revenue and future profitability.

Valuation

• The analysts have a consensus price target of $5.094 for JELD-WEN Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.5, and the most bearish reporting a price target of just $2.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.3 billion, earnings will come to $45.8 million, and it would be trading on a PE ratio of 12.8x, assuming you use a discount rate of 11.4%.
  
• Given the current share price of $4.23, the analyst price target of $5.09 is 17.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.