Worthington Enterprises (WOR) Q1 FY2027 Earnings: Wholly Owned Building Profit Falls About 20%

Worthington Enterprises (WOR) reported fiscal 2027 first-quarter earnings for the three months ended August 31, 2026, in a Form 8-K earnings release on September 22, 2026, and on its earnings call the next day. Group growth and cash flow were solid, but earnings in the wholly owned part of the building business weakened clearly [1][2]. Four questions had been open going into the quarter: whether the building business could still grow organically after the refrigerant-cylinder channel load-in ended, whether joint venture ClarkDietrich's earnings had bottomed, whether higher steel costs could be passed through, and whether data-centre tanks would deliver the promised revenue. Tank revenue reached the promised $13 million, ClarkDietrich came in above the trough range management had described, and gross margin slipped slightly [2][3][4]. Taken together, A2L cylinder inventories are clearing more slowly than expected.

Worthington turns flat-rolled steel into pressure vessels, HVAC components and roofing hardware, selling to contractors through distribution and to large retailers [5]. The company also owns stakes in two unconsolidated joint ventures: WAVE makes ceiling suspension systems and ClarkDietrich makes light-gauge steel framing. Their earnings are booked as equity income, make up most of the company's pre-tax profit and are included in the building segment's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) [1][5].

Building segment sales grew, but wholly owned profit fell about 20%

Acquisitions drove most of the building segment's growth. The segment, renamed Building Performance Solutions this quarter, had net sales of $215.1 million, up 16.4% year over year; acquisitions contributed $19.2 million, and excluding acquisitions sales rose 6.0%, or $11.1 million [1]. Adjusted EBITDA was $59.8 million, essentially flat against $59.9 million a year earlier, and the margin fell from 32.4% to 27.8% [1].

The two joint ventures kept segment profit flat. Equity income from WAVE and ClarkDietrich rose a combined $4.1 million; excluding it, wholly owned EBITDA was about $17.3 million against about $21.6 million a year earlier, a decline of about 20%, and that figure already includes acquisition earnings from Elgen and LSI [1]. The company attributed the gap to lower overall volume and unfavorable product mix [1]. Management said weak new home sales have slowed the clearing of A2L refrigerant cylinder inventories in the channel, and that tight steel supply disrupted shipments [2].

Organic growth also overstates cylinder demand. Data-centre tank revenue was $13 million for all of fiscal 2026 and $13 million in this quarter alone, so the year-over-year increase was at most $13 million and likely accounts for most of the segment's $11.1 million organic growth [2][3]. Because prior-year first-quarter tank revenue was not disclosed, the organic change in the legacy business can only be judged as roughly flat or lower. The fiscal 2026 annual report described the A2L load-in as having lifted channel inventories through the first nine months of that year [6], and this quarter was the second in a row in which the drag held down profit. Management expects the second quarter to remain a difficult comparison and conditions to normalize in the third and fourth quarters [2].

Progress: tanks delivered, joint-venture profit recovered, gross margin under slight pressure

Data-centre liquid-cooling ASME tanks produced $13 million of revenue in the quarter, meeting the commitment made in August, and management expects sequential growth in each remaining quarter of the fiscal year [2][3]. Free cash flow was $54.0 million against $27.9 million a year earlier, with capital spending roughly flat at $12.8 million; $41.9 million came from collecting receivables, which is partly seasonal [1].

ClarkDietrich contributed $7.4 million of equity income against $5.9 million a year earlier, above the $5 million to $6 million quarterly trough range, and WAVE contributed a record $35.1 million [1][4]. One quarter of recovery is not enough to confirm a bottom.

Consolidated gross margin was 26.4%, against 27.1% a year earlier [1]. Management estimated that steel issues cost a few million dollars and said it has raised prices on some products [2]. The quarter also included $4.0 million of one-time net tariff refunds, which supported gross margin and the Trade & Specialty Solutions margin [1].

Conclusion

Revenue grew 13%, adjusted EBITDA grew 10% and free cash flow nearly doubled, but earnings in the wholly owned building business weakened [1]. Joint-venture income, the tank ramp and the tariff refund masked pressure in the cylinder business, and the tariff refund will not recur. Management views the A2L effect as a timing and comparison issue [2]. That view would gain support if wholly owned profit stops falling in coming quarters and organic growth excluding tanks turns positive; if the decline continues in the third quarter, the likelihood of weaker underlying demand rises. Whether tank revenue is additive or is replacing weaker cylinder volume remains to be verified.

Sources

[1] WOR FY2027 Q1 earnings release 2026-09-22 — Worthington Enterprises fiscal 2027 first quarter earnings release, Form 8-K, 2026-09-22, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000108516&type=8-K [2] WOR FY2027 Q1 earnings call summary 2026-09-23 — Worthington Enterprises fiscal 2027 first quarter earnings call summary, earnings call, 2026-09-23, https://www.worthingtonenterprises.com/investors [3] WOR 8-K filed 2026-08-14 — data-center liquid-cooling tank revenue and the first-quarter plan — Form 8-K, 2026-08-14, https://www.sec.gov/Archives/edgar/data/108516/000119312526350842/wor-ex99_1.htm [4] WOR 8-K filed 2026-08-14 — ClarkDietrich equity income and the stated trough — Form 8-K, 2026-08-14, https://www.sec.gov/Archives/edgar/data/108516/000119312526350842/wor-ex99_1.htm [5] WOR 10-K filed 2026-07-30 — Note O segment descriptions and customer concentration — Form 10-K, 2026-07-30, https://www.sec.gov/Archives/edgar/data/108516/000119312526325872/wor-20260531.htm [6] WOR 10-K filed 2026-07-30 — demand trends and the A2L refrigerant channel load-in — Form 10-K, 2026-07-30, https://www.sec.gov/Archives/edgar/data/108516/000119312526325872/wor-20260531.htm