Water management company Northwest Pipe (NASDAQ: NWPX) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 16% year on year to $151.1 million. Its GAAP profit of $1.38 per share was 35.7% above analysts’ consensus estimates.

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"We delivered our strongest quarter in Company history, achieving consolidated revenue of $151.1 million, up 13.4% compared to the previous quarter, and a gross margin of 21.3%, reflecting 230 basis points of sequential quarter margin expansion," said Scott Montross, President and Chief Executive Officer of NWPX Infrastructure, Inc.

Company Overview

Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ: NWPX) is a manufacturer of pipeline systems for water infrastructure.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Northwest Pipe’s 12.5% annualized revenue growth over the last five years was excellent. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Northwest Pipe’s annualized revenue growth of 8.6% over the last two years is below its five-year trend, but we still think the results were respectable.

This quarter, Northwest Pipe reported year-on-year revenue growth of 16%, and its $151.1 million of revenue exceeded Wall Street’s estimates by 14.4%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Northwest Pipe has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.6%, higher than the broader industrials sector.

Looking at the trend in its profitability, Northwest Pipe’s operating margin rose by 3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Northwest Pipe generated an operating margin profit margin of 12.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Northwest Pipe’s EPS grew at an unimpressive 7% compounded annual growth rate over the last five years, lower than its 12.5% annualized revenue growth. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Northwest Pipe’s two-year annual EPS growth of 25.4% was fantastic and topped its 8.6% two-year revenue growth.

Diving into Northwest Pipe’s quality of earnings can give us a better understanding of its performance. While we mentioned earlier that Northwest Pipe’s operating margin was flat this quarter, a two-year view shows its margin has expandedwhile its share count has shrunk 2.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q3, Northwest Pipe reported EPS of $1.38, up from $1.02 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Northwest Pipe’s full-year EPS of $3.68 to stay about the same.

Key Takeaways from Northwest Pipe’s Q3 Results

It was good to see Northwest Pipe beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock remained flat at $55.68 immediately after reporting.

Northwest Pipe may have had a good quarter, but does that mean you should invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.