Worthington Steel Inc (WS) QQ4 2023 Results – Revenue Rebound drives profits in a cyclic NA steel market with disciplined cash flow and moderate margin pressure
Executive Summary
Worthington Steel reported a strong fourth quarter (Q4 2023) with revenue of $911.0 million, up from the prior quarter’s $805.8 million, signaling a rebound in demand for value-added steel processing. Gross profit was $129.1 million for a gross margin of 14.17%, while EBITDA reached $81.5 million and a margin of 8.95%. Operating income totaled $65.4 million (7.18% margin) and net income was $53.2 million (5.84% net margin), with earnings per share of $1.08. These results reflect resilient end-market activity across automotive, heavy truck, construction, and energy segments, coupled with a conservative cost structure.
Key Performance Indicators
Revenue
911.00M
QoQ: N/A | YoY:N/A
Gross Profit
129.10M
14.17% margin
QoQ: N/A | YoY:N/A
Operating Income
65.40M
QoQ: N/A | YoY:N/A
Net Income
53.20M
QoQ: N/A | YoY:N/A
EPS
1.08
QoQ: N/A | YoY:N/A
Revenue Trend
Margin Analysis
Key Insights
Revenue: $911.0 million (Q4 2023) vs. Q3 2023: $805.8 million; QoQ growth ≈ 13.3%
- Revenue: $911.0 million (Q4 2023) vs. Q3 2023: $805.8 million; QoQ growth ≈ 13.3%
- Gross margin: 14.17% (gross profit $129.1 million)
- EBITDA: $81.5 million; EBITDA margin: 8.95%
- Operating income: $65.4 million; operating margin: 7.18%
- Net income: $53.2 million; net margin: 5.84%
- EPS: $1.08; weighted avg shares: 49.33 million
- Operating cash flow (CFO): $35.6 million; capex: $44.8 million; free cash flow (FCF): -$9.2 million
- Cash at end of period: $40.2 million; change in cash: -$20.6 million
- Current ratio: 1.62; quick ratio: 0.97; cash ratio: 0.07
- Debt to capitalization: 18.5%; long-term debt to capitalization: 6.48%; interest coverage: 27.25x
Income Statement
Metric
Value
YoY Change
QoQ Change
Key Financial Ratios
currentRatio
1.62
grossProfitMargin
14.2%
operatingProfitMargin
7.18%
netProfitMargin
5.84%
returnOnAssets
2.85%
returnOnEquity
5.4%
debtEquityRatio
0.23
operatingCashFlowPerShare
$0.72
freeCashFlowPerShare
$-0.19
dividendPayoutRatio
14.8%
priceToBookRatio
1.65
priceEarningsRatio
7.65
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data provided in the dataset. Therefore, no management quotes or theme-based highlights from the QQ4 2023 call are available.
—
—
Forward Guidance
The dataset does not include formal management guidance for FY-2024. Given Q4 2023 results, investors should watch: (1) commodity steel cost trends and raw material prices, (2) end-market demand in automotive, construction, and energy, (3) the pace and returns on ongoing capital expenditures (capex) for tailored welded blanks, laminations, and aluminum blanks, and (4) working capital dynamics and free cash flow trajectory as capex moderates. If demand remains steady and pricing discipline is maintained, WS could stabilize margins above the qoq level observed in Q4. Key factors to monitor include capacity utilization, order backlogs, supplier pricing, and any changes in tariff or trade policy that affect input costs and competitiveness.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WS Focus
14.17%
7.18%
5.40%
7.65%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Worthington Steel presents a constructive near-term investment thesis: it generated meaningful quarterly revenue with improving end-market demand and maintained solid profitability alongside favorable leverage metrics. The company benefits from a diversified NA end-market mix and disciplined capital deployment. However, near-term free cash flow is negative due to continued capex, which may temper cash-based returns until capacity expansions contribute to higher future output. A cautious stance is warranted until management provides clearer guidance and evidence that margin stability can be sustained as capex progresses. Valuation multiples in the dataset (P/E ~7.65, P/B ~1.65, P/S ~1.79) imply the stock could be attractively valued relative to cyclicality; performance should be gauged against the cadence of capex, end-market demand, and input cost dynamics over the next few quarters.
Key Investment Factors
Growth Potential
Moderate growth potential from value-added steel processing (tailor welded blanks, laminations, aluminum blanks) and continued exposure to expanding NA automotive, heavy truck, and energy sectors. The quarterly rebound in Q4 2023 revenue supports upside if end-market demand holds and pricing proves resilient.
Profitability Risk
Cyclicality of the steel industry and sensitivity to input costs; capital expenditure intensity pressures near-term free cash flow; modest liquidity cushion and a low cash ratio may constrain flexibility; limited peer benchmarking in the dataset complicates relative valuation.
Financial Position
Conservative balance sheet with low leverage (debt/capitalization ~18.5%), solid cash generation from operations, and manageable interest coverage (~27.25x). However, free cash flow was negative in QQ4 due to capex, and liquidity metrics show a cash ratio around 0.07 and a cash balance of $40.2 million.
Working capital intensity (change in working capital of -$40.8 million in Q4) and a negative free cash flow (-$9.2 million due to capex of $44.8 million)
Near-term capital expenditure drive may pressure cash generation and liquidity metrics