Building materials company Azek posted double-digit sales growth in its most recent quarterly report as a glowing real estate market continues to transition into the remodeling industry.
Demand, driven by a combination of low mortgage rates, low home ownership and increased relocation activity amid the coronavirus pandemic, makes Azek CEO Jesse Singh look optimistic over the long term.
"The focus on the home really gives us long-term advantage because we really get the benefit of people investing in their homes," said CNBC's Jim Cramer in an appearance on Mad Money Friday.
Coronavirus lockdowns have spurred domestic consumers to spend more money remodeling their homes, including decks and other outdoor furnishings. The increased spending resulted in a 28% year-over-year increase in the first quarter of the fiscal year ended December 31, compared to pandemics in Azek's sustainability-focused business.
The company, which sells recycled materials for residential and commercial buildings, had sales of $ 212.3 million compared to $ 166 million last year. The residential real estate business, which accounted for around 87% of total sales, recorded a 37% increase in sales. Azek reported earnings of $ 10 million for the quarter.
The quarterly growth also outperforms the 13% growth reported by Azek in its full year 2020 results, which ended on September 30th. Total revenue for the twelve month period was $ 899.3 million.
The Chicago-based materials maker has also improved its outlook for the current fiscal year. Management is now forecasting sales growth of between 14% and 18% for the current financial year, after originally forecasting sales growth of 10% to 14%.
Given that Azek makes products primarily from recycled items, Singh said it has been protected from the surge in raw material prices, including the price of wood, to the company's benefit. As part of its earnings report, the company also announced a goal of using 1 billion pounds of recycled scrap and waste annually to make its products by 2026.
"For us, this billion pounds is really a mission for the company," he said. "It allows us and our employees to really focus on making a difference in the environment, and it's also our way of making a difference in the longer term against climate change."
Singh, who headed the company in 2016 before going public in June last year, said there are several trends in the real estate market that make him optimistic about the future, including the fact that more millennial homebuyers are entering the market come.
Azek also benefits from home upgrades. It sells products for outdoor living made from low-maintenance materials, Singh said.
Last year, the company embarked on a $ 180 million multi-year investment program to expand manufacturing capacity in the United States, including adding vendors and improving its marketing skills. Acquisitions of other companies are also on the table, said Singh.
"We are still evaluating the acquisition pipeline," he said. "We believe there is an opportunity there to continue expanding outside of the house, maintaining our margin structure, maintaining our great value proposition, but also introducing some additive products, so we will continue to evaluate that."
Azek's shares closed 5% higher at $ 47.19 on Friday. The stock is up 23% so far in 2021, giving it a market valuation of $ 7.3 billion.