Worthington Enterprises (WOR): A Contrarian Buy Despite Earnings Outperformance?

The stock market is a theater of contradictions. Nowhere is this more evident than in the case of Worthington Enterprises (WOR), whose third-quarter 2025 earnings report defied expectations while its share price faltered. The company delivered a 14% year-over-year increase in adjusted earnings per share (EPS) to $0.91, outpacing analyst forecasts by 29% according to the company's Q3 report, and revenue of $304.5 million exceeded estimates by 5.3% according to Spartan Capital analysis. Yet, despite these strong results, WOR shares fell 11.5% in the weeks following the report, closing at $53.29-a stark divergence from the bullish fundamentals as noted by Seeking Alpha. This disconnect raises a critical question: Is WOR a contrarian buy, or does the market's skepticism reflect deeper structural concerns?

The Earnings Beat: A Tale of Operational Resilience

Worthington's Q3 performance was underpinned by strategic moves and operational discipline. The deconsolidation of its former Sustainable Energy Solutions segment-a move that reduced revenue by 4% year-over-year-was offset by the acquisition of Ragasco and volume growth in its Building Products division. Adjusted EBITDA from continuing operations surged 10% to $73.8 million, a testament to the company's ability to navigate sector-specific headwinds. Management also maintained its dividend tradition, declaring a $0.17-per-share payout, signaling confidence in its cash flow stability.

Analysts praised the results. "The company's ability to exceed revenue and EPS estimates in a challenging macroeconomic environment is commendable," noted a report by Benzinga. Yet, the stock's post-earnings decline suggests that investors are not fully crediting these achievements.

The Stock's Dilemma: Sector Headwinds and Tariff Jitters

The broader Industrials sector, which includes WOR, experienced a volatile post-earnings period. While the S&P 500 Industrials sector gained 3.7% in Q3 2025, reflecting optimism around AI-driven infrastructure demand as discussed by Schwab, the sector faced renewed skepticism in late March 2025. The S&P 500 as a whole dropped 5.6% that month, driven by uncertainty over U.S. trade policy and the potential for tariffs to disrupt supply chains. WOR, like many industrials, was not immune to this sell-off.

The company's management acknowledged these risks during its earnings call, citing "tariff-related costs and a cautious consumer environment" as near-term challenges. Analysts echoed these concerns, with some downgrading WOR due to its historically low returns on capital and declining sales over the past five years according to StockStory. The stock's 11.5% drop post-earnings, despite a 5.4% EPS beat, suggests that investors are prioritizing macroeconomic fears over short-term operational gains.

Contrarian Logic: Valuation and Long-Term Catalysts

Despite the near-term volatility, WOR's fundamentals present a compelling case for a contrarian investor. The company's adjusted EPS of $0.91 in Q3 2025, coupled with a 10% increase in EBITDA, indicates robust profitability. Analysts maintain a "Buy" consensus rating, with an average one-year price target of $73-a 25% upside from its post-earnings close. This suggests that the market may be underestimating WOR's long-term potential.

Moreover, WOR's strategic focus on mergers and acquisitions-highlighted by the Ragasco acquisition-positions it to capitalize on industry consolidation as noted by Spartan Capital. The company's Building Products segment, which drives 60% of its revenue, is well-positioned to benefit from the AI-fueled infrastructure boom as Schwab reports. If trade policy risks abate, WOR's operational efficiency and disciplined capital allocation could unlock significant value.

The Verdict: A Calculated Bet

Worthington Enterprises' stock price reaction post-Q3 2025 earnings reflects a market grappling with macroeconomic uncertainty and sector-specific concerns. However, the company's outperformance in key metrics-adjusted EPS, EBITDA, and revenue-demonstrates resilience that may not be fully priced in. For investors with a medium-term horizon, WOR offers a compelling risk-reward profile. The stock's current valuation, trading at a discount to its five-year average price-to-earnings ratio, and its alignment with long-term industrial trends make it a candidate for a contrarian buy.

That said, caution is warranted. The sustainability of WOR's growth will depend on its ability to navigate tariff-related costs and maintain profitability in a cautious consumer environment. As Schwab's Sector Views note, the Industrials sector's performance remains contingent on the resolution of trade tensions and the pace of economic growth as discussed by Schwab. For now, WOR's earnings outperformance suggests that the company is not broken-just temporarily out of favor.