Freedom Broker: data-center demand creates a new catalyst for Worthington

Demand for liquid-cooling equipment for data centers has become an additional catalyst for Worthington Enterprises (WOR), Freedom Broker analysts note. The company beat market expectations for revenue and adjusted profit for the first quarter of fiscal 2027, and its shares jumped 17.7% in premarket trading after the results were released.

What Worthington Enterprises does

Worthington Enterprises develops and manufactures equipment and specialized solutions for construction, industry, and other commercial sectors. The company operates through two main segments.

The Building Performance Solutions division produces solutions for construction and improving building efficiency. The Trade & Specialty Solutions segment, formerly Consumer Products, combines specialized equipment and products for professional use.

One of the new growth areas is the production of tanks for liquid-cooling systems for data centers. Such systems remove heat from server and computing equipment using liquid and are becoming particularly important as artificial-intelligence infrastructure scales up in power.

Data centers strengthened investors’ positive reaction

The company’s shares rose 17% to $59.7 after the new report was published. An additional catalyst for buying was comments from CEO Joe Hayek about rapidly growing demand for certified ASME tanks for liquid-cooling systems for data centers, Freedom Broker analysts said.

ASME is the American Society of Mechanical Engineers, which sets technical standards for industrial equipment. Certification confirms that the tanks meet established requirements for design, manufacturing, and operation.

Demand for such products gives Worthington an opportunity to participate in the expansion of data-center infrastructure. Growing computing capacity increases the need for effective server cooling, and management’s comment points to an additional source of orders for the company.

At the same time, the analysts do not provide forecasts for the amount of Worthington’s revenue from this area. Therefore, data-center demand is still viewed as a new potential catalyst rather than an already established standalone financial segment.

Revenue exceeded market expectations

Worthington finished the first quarter of fiscal 2027 with net sales of $343.9 million. The figure increased by $40.2 million, or 13%, compared with the same period of the previous year. Market consensus was $331.3 million.

Recent acquisitions brought the company $19.2 million in revenue and delivered 6% growth. Excluding the deals, sales increased by $21.0 million, or 6.9%. Organic growth, reflecting the performance of the existing business without the contribution of acquired assets, was 7%.

Adjusted earnings per share reached $0.82 versus analysts’ forecast of $0.75 and $0.78 a year earlier. GAAP diluted earnings per share rose from $0.70 to $0.87.

“We began fiscal 2027 with solid results. Organic growth was 7%, adjusted EBITDA increased 10%, and free cash flow nearly doubled,” said Worthington Enterprises President and CEO Joe Hayek.

Net income rose 22%

Worthington’s net income increased 22%, from $34.8 million to $42.6 million. Adjusted net income rose 3%, from $38.9 million to $40.1 million. Adjusted EBITDA climbed 10%, from $67.2 million to $74.0 million. EBITDA reflects earnings before interest, taxes, and depreciation and amortization and helps assess operating performance without regard to financing structure and certain non-cash expenses.

Operating profit increased from $9.2 million to $13.0 million. At the same time, adjusted operating profit was almost unchanged at $13.7 million versus $13.9 million a year earlier.

The result was supported by recent acquisitions, volume growth in the Trade & Specialty Solutions division, and a net return of $4.0 million in duties related to the U.S. International Emergency Economic Powers Act (IEEPA). The positive effect was partially offset by lower volumes and a less favorable sales mix in the Building Performance Solutions segment.

Free cash flow nearly doubled

Worthington’s cash flow from operating activities grew by $25.7 million—from $41.1 million to $66.7 million. Free cash flow increased by $26.1 million, from $27.9 million to $54.0 million. Free cash flow shows how much cash a company has left after funding ongoing operations and required capital expenditures. Its growth expands Worthington’s ability to invest, make acquisitions, pay dividends, and repurchase shares.

At quarter-end, total debt stood at $305.6 million and was entirely long-term. The amount was virtually unchanged compared with May 31, 2026. The company extended the maturity of its revolving credit facility to August 31, 2031. As of the reporting date, Worthington had not drawn on the facility, so the entire available $500 million remained unused.

Worthington continues returning capital to shareholders

During the quarter, Worthington repurchased 335 thousand of its own shares for $18.2 million. Under the existing buyback program, the company can still acquire another 4.23 million shares. The board of directors also declared a quarterly dividend of $0.20 per share.

Not an individual investment recommendation.