JELD-WEN (NYSE:JELD): A Natural Resource Opportunity for Mid-term Investors

JELD-WEN Holding, Inc. (NYSE: JELD) is a multinational corporation that manufactures and distributes interior and exterior doors, windows, and related building products. Headquartered in Charlotte, North Carolina, the company operates facilities in 16 countries across North America and Europe and employs approximately 18,000 people.  

JELD-WEN was founded in 1960 and has a long history of providing high-quality products and services to the construction industry. JELD-WEN offers a wide variety of interior and exterior doors, windows, and related building products. The company’s doors are known for their durability, style, and ease of installation.  

JELD-WEN’s windows are also known for their energy efficiency and weather resistance. JELD-WEN’s family of brands includes JELD-WEN® worldwide LaCantina™ and VPI™ in North America Swedoor® and DANA® in Europe. 

Highlights and News Updates 

• On August 7^th, 2023, JELD-WEN appointed Michael F. Hilton to the board of directors. JELD-WEN Holding Inc. – appointment expanded the company’s board to 10 members, eight of whom are independent. 

• On August 4^th, 2023, JELD-WEN completed the redemption of senior notes. 

• On July 5^th, 2023, JELD-WEN Inc. redeemed all US $250 million worth of its 6.250% senior secured notes was due on May 2025 along with US $200 million worth of 4.625% senior notes was due on December 2025. 

• On July 3^rd, 2023, JELD-WEN Inc. said it has completed the sale of its Australasia business to Platinum Equity for net proceeds of about US $446 million. The sale is part of the company’s strategy to streamline and focus on its two core regions, North America and Europe. The company plans to use the net proceeds from the transaction to repay debt. 

• On June 1^st, 2023, JELD-WEN named Jas Hayes Executive Vice President, General Counsel, and Corporate Secretary. 

Key Data 

Third Quarter 2023 Highlights 

• Revenue fell 16.9% to US $1.08 billion from a year ago; analysts expected US $1.02 billion. 

• JELD-WEN Holding Inc’s reported EPS for the quarter was US $ 0.51 cents​. 

• The company reported quarterly net income of US $43.8 million compared to the loss of US $33.19 million in last year’s third quarter. 

• The mean earnings estimate of analysts had fallen by about 8.5%. 

Financials 

JELD-WEN has experienced relatively stable revenue over the last five years, with a notable fluctuation in net income during this period. In 2018, net income reached over US $144 million, but it decreased significantly to US $62.97 million in 2019. The company saw a rebound in net income to US $91.59 million in 2020, only to experience another decline to US $45.73 million in 2022. 

Despite the volatility in net income, JELD-WEN has maintained profitability throughout the five-year period. The gross profit margin has remained relatively steady, fluctuating between 23% and 25%. However, the operating profit margin has shown more variability, ranging from 6% to 12%. 

Various factors, including the impact of the COVID-19 pandemic, supply chain disruptions, and rising inflation, have influenced JELD-WEN’s financial performance. In response to these challenges, the company has implemented strategies to mitigate the issues, such as cost reduction and efficiency improvements. However, the long-term effects of these challenges on JELD-WEN’s financial performance remain uncertain. 

JELD-WEN has demonstrated stability in its debt levels over the past five years, ranging from US $1,477.892 million in 2018 to US $1,747.629 million in 2022. Notably, the company has achieved a substantial reduction in its debt during 2023, reporting a debt balance of US $1,233.753 million as of the third quarter. 

The debt-to-asset ratio has shown improvement over recent years, decreasing from 0.49 in 2018 to 0.42 in 2023. This positive trend indicates that JELD-WEN is becoming less reliant on debt to fund its operations. Moreover, the company’s ability to service its debt appears robust. The interest coverage ratio, a metric measuring the company’s capacity to meet its debt obligations, stood at 5.6x in 2023. 

The company also has assets worth US $3.008 billion including cash of US $239.219 million. The company also has retained earnings of US $227.686 million. 

In the fourth quarter of 2022, JELD-WEN reported a revenue of US $1.331 billion, accompanied by a net income of US $33.60 million. Transitioning into the first quarter of 2023, the company experienced a slight dip in revenue, reaching US $1.222 billion, with a net income of US $15.134 million. However, the second quarter of 2023 showed a further decrease in revenue to US $1.126 billion, but notably, the net income rebounded to US $38.281 million. The positive trend continued into the third quarter of 2023, where revenue amounted to US $1.077 billion, and the net income increased to US $43.785 million. 

While the company’s revenue appears relatively stable across these quarters, the noteworthy aspect lies in the performance of net income. Despite the overall revenue stagnation, JELD-WEN has managed to achieve comparatively strong net earnings. This indicates effective cost management, improved operational efficiency, or strategic initiatives that positively impact the company’s bottom line. The ability to maintain solid net income in the face of stable or slightly declining revenue suggests that JELD-WEN has implemented measures to optimize its profitability. 

Right now, the EPS of the company is at US $0.53 which is down by 69.18% compared to the last year’s EPS. 

Forecast 

Right now, the company is trading at US $15.99 with a 1-year projected target of around US $19.48-$18.15, and a low estimation will be US $15.40; the average price target will be US $16.98. 

Technical Analysis 

• The price action analysis of the stock indicates a positive uptrend in the stock.   

• Right now, RSI (67.45) indicator is above 50 which shows it is a good time to invest in this stock.  

• The stock has the potential to bounce back up to 16%-22% from the current market price. 

Indicators Summary – Buy 

• Market sentiments are bullish, and stock can go up further.  

• MACD (0.15) indicator is giving a bullish signal.  

• VWAP (73.38) indicator is bullish on the stock.  

• The momentum indicator is also giving us a bullish signal. 

ESG Factor 

JELD-WEN exemplifies a steadfast dedication to environmental, social, and governance (ESG) principles, garnering recognition for its remarkable progress in recent years. Acknowledged by reputable organizations such as Sustainalytics and MSCI, the company has reduced greenhouse gas emissions by an impressive 20% since 2015, concurrently elevating its utilization of recycled materials to an admirable 25%.  

With an outstanding 97% energy efficiency rating for its windows, JELD-WEN showcases a commitment to sustainable practices. Prioritizing employee safety, the company has achieved a commendable Lost Time Injury Rate (LTIR) of 0.48, fostering a diverse workforce and upholding principles of pay equity. Actively engaged in community support initiatives through programs like the JELD-WEN Foundation, the company has attained an ESG Risk Rating of 21.9 from Sustainalytics and a BBB rating from MSCI.  

Emphasizing its commitment to ongoing improvement, JELD-WEN has set ambitious ESG goals, aiming to reduce greenhouse gas emissions by 50%, utilize 100% recycled materials, achieve an LTIR of 0.00, and increase workforce diversity to 50%, all by 2030. The company’s multifaceted ESG initiatives and accolades underscore its holistic commitment to responsible and sustainable business practices. 

Risk factors 

JELD-WEN Holding, Inc. is a manufacturer of interior and exterior doors and windows. The company faces a number of risks, including: 

• Industry risk: The door and window industry is cyclical and is sensitive to changes in interest rates, housing starts, and consumer spending. 

• Competitive risk: JELD-WEN faces competition from a number of large and small companies, including Masonite, Pella Corporation, and Andersen Corporation. 

• Regulatory risk: JELD-WEN is subject to a number of regulations, including environmental regulations, building codes, and product safety standards. Changes to these regulations could increase the company’s costs or reduce its ability to sell its products. 

• Pension risk: JELD-WEN has a large pension obligation. Changes in interest rates or asset prices could increase the company’s pension expense. 

Stock Recommendation 

JELD-WEN stands out as a prominent and widely recognized brand in the door and window industry, celebrated for the quality, durability, and style of its products. Its extensive range of interior and exterior doors, windows, and related building products contributes to a diversified portfolio, providing resilience against fluctuations in specific product categories. The company’s products are distributed through a robust network of retail outlets and homebuilders, ensuring broad market reach. 

Operating globally in countries such as the United States, Canada, Europe, and Australia, JELD-WEN’s geographic diversity serves as a strategic buffer against regional economic challenges. This global presence not only expands market opportunities but also helps mitigate risks associated with dependency on any single market. 

Fueled by a strong balance sheet and the generation of substantial free cash flow, JELD-WEN possesses the financial flexibility to invest in new products, expand operations, and pursue strategic acquisitions. The company’s commitment to sustainability is evident in its use of recycled materials and environmentally conscious processes, reflecting a dedication to minimizing its environmental impact. 

Under the guidance of an experienced management team with a proven track record of success, JELD-WEN is positioned to execute its long-term strategy and create shareholder value. The emphasis on sustainable practices, product diversification, global presence, and financial strength underscores the company’s holistic approach to leadership in the door and window industry. 

MarketFacts gives a “Buy” rating on the stock at the closing price of US $15.99 as of November 27^th, 2023. 

CMP (US) (Nov 27, 2023)	$15.99
Target Price	$18.15
Recommendation	Buy

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