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Investors are closing the door on JELD-WEN (JELD) today after the company fell short of Q4 revenue expectations and provided revenue guidance for FY24 that was below analysts' estimates at the midpoint of its $4.0-$4.3 bln guidance range. The door maker continues to face significant volume mix headwinds in both its U.S. and European markets, and it anticipates that conditions will remain difficult in FY24.

• In North America, which accounted for 73% of Q4 revenue, lower volume mix of 16% drove a 13% decrease in net revenue to $747.6 mln. During the earnings call, CFO Julie Albrecht stated that high interest rates continued to weigh on consumer confidence, creating affordability issues. This isn't only impacting the housing market, but it's also hindering the repair and remodel (R&R) market -- a theme we also heard from Home Depot (HD), which issued its own disappointing guidance this morning.
• Unfortunately, she expects these headwinds to persist in 2024, forecasting R&R activity to decrease by low-to-mid single digits in FY24. A similar rate of decline is expected for JELD's overall volumes in North America.
• The news for the European market is even more bleak. Core revenue dove by 18% to $273.4 mln as residential construction remains soft across the continent. Making matters worse, commercial project volumes are also slowing in Europe, which Ms. Albrecht expects to continue throughout this year. Consequently, JELD's volumes in this region are forecasted to fall by high-single-digits in FY24.
• It's not all doom and gloom, though. Despite the soft market conditions, adjusted EBITDA margin expanded by 190 bps yr/yr to 8.5%. The company achieved the improved margins through a combination of factors, including reductions to its cost base and the closure of five sites. In FY23, JELD reached its cost savings goal of $100 mln, while also divesting its Australian business. With the proceeds from that divestiture, JELD repaid $450 mln of long-term debt, lowering its interest expense burdens.
• Although JELD is pleased with its streamlining and productivity improvements, it believes there is more room for further improvement, stating that "our margins are still not where they should be." On that note, JELD is targeting FY24 adjusted EBITDA of $370-$420 mln, representing yr/yr growth of 10.5% at the high end, even as volumes are anticipated to decline again.

The main takeaway is that, like HD, JELD doesn't foresee a substantial improvement in the demand picture this year, even as interest rates are expected to ease. That is creating plenty of disappointment, but JELD's streamlining actions do position the company for much stronger earnings growth once housing and R&R market conditions do improve.