Shares of window and door maker PGT Innovations (NASDAQ:PGTI) started the day on fire, rising by as much as 27% in the first 30 minutes of trading. There was no question about why: The industrial company reported solid earnings. But there was more to the jump than that.
The headline numbers for PGT Innovations were pretty good. First-quarter 2020 sales came in 27% higher than the year-ago period, helped along by an acquisition. Adjusted net income per share was up even more, rising an impressive 75% year over year. The company clearly had a good quarter despite the impact of COVID-19. But, like so many companies, PGT highlighted a significant slowdown in demand in April.
That sounds like bad news, and it is. But the nuances here are important. For example, the April order decline was 30% sequentially compared to the first quarter, but only down about 10% from the previous year. So the hit isn't quite as bad as it might seem. And while the company scaled back its operations to adjust for the weaker demand, it noted that it has begun to ramp back up in some regions (notably Florida) because demand has picked up again in May. Once again, PGT Innovations appears to be doing pretty well despite the headwinds.
PGT Innovations is a relatively small provider of construction products. Moreover, it focuses on just windows and doors, so it isn't particularly diversified. There's a lot up in the air right now with COVID-19 and the reopening of the U.S. economy is likely to be a slow process. There's also a high likelihood that COVID-19 containment efforts will lead to a recession, which would probably crimp construction. PGT Innovations' story is an interesting one, but one earnings release isn't enough to make a trend. That's especially true given the quick turnaround between April and May -- If COVID-19 makes a resurgence or a recession does unfold, demand could just as easily fall off again.