Is Worthington (WOR) a Buy After Q4 Earnings? A Deep Dive into Margin Recovery and Acquisition Synergies

The steel manufacturing sector has long been a barometer of macroeconomic health, and Worthington Industries (WOR) and its affiliate, Worthington Steel, have navigated a complex landscape in recent quarters. With Q4 2024 results revealing stark divergences in performance between the two entities, investors are now scrutinizing whether strategic moves-particularly the acquisition of Italy-based Sitem S.p.A.-can catalyze margin normalization and sustainable growth. This analysis evaluates the financial and operational implications of these developments to determine if WOR is a compelling buy.

Q4 2024 Earnings: A Tale of Two Entities

Worthington Industries' Q4 2024 results were a stark contrast to those of its sister company, Worthington Steel. While the broader Worthington umbrella reported a net loss of $31.79 million and a 13.6% decline in net sales to $318.8 million, driven by destocking and weak demand, Worthington Steel delivered a markedly different narrative. The latter reported net sales of $911.0 million-a 3% year-over-year increase-and a net earnings per diluted share of $1.06. This divergence underscores the importance of segmenting analysis within the Worthington ecosystem.

The gross margin of 24.5% for Worthington Industries, despite the revenue decline, hints at operational resilience. However, the net loss of $0.64 per share-a 124% year-over-year drop-highlights the fragility of its earnings structure. In contrast, Worthington Steel's adjusted EBITDA of $70.4 million in Q4 2024, though down from $98.4 million in the prior year, reflects a more stable cost base and disciplined execution.

Strategic Acquisition of Sitem S.p.A.: A Game Changer?

The acquisition of Sitem S.p.A., finalized in June 2025, represents a pivotal strategic move for Worthington Steel. By acquiring a 52% stake in the Italian producer of electric motor laminations, Worthington Steel has positioned itself to capitalize on the surging demand for electric vehicles (EVs) and industrial automation in Europe. Sitem's six facilities across Italy, Switzerland, Slovakia, and France not only diversify Worthington Steel's geographic footprint but also align with its focus on high-growth, value-added segments.

The acquisition's integration has already shown early signs of success. In Q2 2026, Sitem contributed approximately 2% to Worthington Steel's 18% year-over-year sales growth, with $1.6 million in gross margin added during the period. While the $2.5 million increase in SG&A expenses attributed to Sitem raises short-term concerns, the broader context is encouraging: operating income rose by $2.8 million in Q2 2026, driven by a $13.2 million gross margin expansion. This suggests that the acquisition is beginning to deliver the operational efficiencies and revenue synergies management had projected.

Margin Normalization and Sustainable Growth Catalysts

Worthington Steel's Q2 2026 results highlight a strategic pivot toward margin normalization. Management emphasized disciplined product mix, inventory optimization, and higher-value solutions as key drivers of improved earnings resilience. The $13.2 million gross margin increase in Q2 2026, partially offset by higher SG&A costs, indicates that the company is navigating integration challenges while maintaining a focus on profitability.

The Sitem acquisition also aligns with broader industry tailwinds. As EV adoption accelerates in Europe, demand for electrical steel laminations-a core component of electric motors-is expected to grow at a compound annual rate of 12% through 2030. Worthington Steel's expanded capabilities in this niche position it to capture market share from competitors less equipped to scale in the EV era.

Challenges and the Road Ahead

Despite these positives, risks remain. The closure of the Cleveland, Ohio toll processing facility and a 24% decline in toll volumes in Q2 2026 underscore the vulnerability of lower-margin segments. Additionally, the $9.8 million rise in SG&A expenses, while partly attributable to Sitem integration, could pressure near-term margins if not offset by revenue growth.

However, management's confidence in fiscal 2026 is well-founded. The CEO highlighted AI-driven operational improvements and expansion projects as catalysts for long-term value creation. These initiatives, combined with Sitem's contribution to direct volumes and gross margin, suggest a path to sustainable growth.

Conclusion: A Buy for the Long-Term Investor

Worthington Industries' Q4 2024 struggles mask the broader strength of Worthington Steel, which has demonstrated resilience through strategic acquisitions and operational discipline. The Sitem acquisition, in particular, is a masterstroke that aligns with high-growth industry trends and has already begun delivering tangible benefits. While short-term margin pressures persist, the company's focus on margin normalization, inventory management, and AI-driven efficiency gains positions it for a stronger 2026.

For investors with a medium- to long-term horizon, Worthington (WOR) appears to be a compelling buy. The key will be monitoring the pace of Sitem integration and the company's ability to leverage its expanded capabilities in the EV supply chain.