Northwest Pipe (NWPX): A Hidden Gem in Infrastructure Growth

The recent earnings miss for Northwest Pipe (NWPX) has sent shares tumbling, but beneath the surface lies a company positioned to capitalize on robust demand for infrastructure and housing. While short-term challenges like trade policy headwinds and weather disruptions have clouded the stock's outlook, the fundamentals suggest the market has overreacted. With strong revenue growth in its Precast segment, improving order backlogs, and strategic initiatives to boost margins, NWPX presents a compelling entry point for investors looking to profit from the long-term infrastructure boom.

The Earnings Miss: A Closer Look
Northwest Pipe's Q1 2025 results disappointed on earnings, with EPS of $0.39 falling short of estimates by 26.9%. However, the revenue story was far brighter: net sales rose 2.6% year-over-year to $116.1 million, surpassing forecasts by 3.7%. The miss was driven by margin compression in its Engineered Steel Pressure Pipe (SPP) segment, where tariffs and weather-related downtime reduced production volumes by 18%, even as selling prices rose 20%. Yet, management emphasized that the SPP backlog—now at $289 million including confirmed orders—is rebounding strongly, with $60 million in new orders secured in a single week. This signals a potential second-half recovery.

Precast: The Growth Engine Ignites
The Precast Infrastructure segment delivered a standout performance, with sales surging 13.4% to $37.7 million. The segment's order book jumped 23% year-over-year to $64 million, fueled by non-residential construction demand. The 21% increase in volume shipped highlights operational efficiency gains, while margins expanded to 19.1%, up from 17.7% in 2024. This segment is not just a side business—it's a growth catalyst. With the U.S. infrastructure spending boom expected to accelerate, Precast's exposure to water and wastewater systems, bridges, and commercial buildings positions NWPX to benefit from both public and private sector projects.

Backlog and Balance Sheet: Strength in Resilience
The company's balance sheet remains a pillar of stability. Despite the earnings miss, free cash flow turned positive at $1.18 million in Q1, a dramatic improvement from -$30.66 million in 2024. The SPP backlog, though temporarily lower year-over-year, has rebounded to $289 million with confirmed orders, while Precast's $64 million order book reflects strong demand visibility. Combined with $98 million in available borrowing capacity and minimal debt, NWPX is financially equipped to navigate near-term turbulence.

Investors should also note the $5.0 million in share repurchases executed in April 2025 at an average price of $40.82—a clear sign of management's confidence in the stock's undervalued status.

Why the Stock Is Overly Pessimistic
The market's reaction to NWPX's earnings miss has been overly harsh. Shares fell 6.4% in after-hours trading, yet the stock's forward P/E of 11.9x remains far below its historical average and peers in the construction materials sector. This disconnect suggests investors are pricing in permanent margin erosion and operational stagnation—a narrative that doesn't hold under scrutiny.

Consider this:

While the stock has underperformed peers, its EBITDA trajectory—though temporarily dented—aligns with cyclical recovery patterns in infrastructure stocks. The rebranding to “NWPX Infrastructure, Inc.” underscores management's strategic focus on long-term growth, not short-term metrics.

The Bull Case: Infrastructure Tailwinds and Margin Turnaround
Northwest Pipe operates in two sectors with durable demand:
1. Housing and Commercial Construction: Precast's residential sales are booming, while non-residential demand is set to rebound as supply chain issues ease.
2. Public Infrastructure: Federal funding for water systems, highways, and bridges is accelerating, directly benefiting the SPP segment.

Management's plan to offset trade-related costs—such as shifting production to domestic facilities and negotiating cost-sharing with customers—is already bearing fruit. The SPP margin decline to 15.5% from 17.8% in 2024 is likely temporary, as improved backlog utilization and pricing power could push margins back toward historical levels.

Risks, but Not Dealbreakers
Trade policy uncertainty and steel price volatility remain risks. However, the company's geographic diversification and product mix flexibility mitigate these risks. The SPP segment's recent order rebound and Precast's robust backlog suggest management is effectively navigating these challenges.

Conclusion: A Buy at This Price
Northwest Pipe is a rare combination of a beaten-down stock with a resilient balance sheet, a growing cash cow (Precast), and a turnaround story in its core SPP business. At current prices—near a 52-week low—the stock offers a margin of safety while positioning investors to capture upside from infrastructure spending and margin recovery.

Investors should act now: with shares down 15% year-to-date and the company's intrinsic value likely exceeding its current market cap, the risk-reward here is highly favorable. The next catalyst? Second-quarter results, where management expects SPP margins to improve and Precast to deliver stronger revenue growth. This is a stock to buy while fear outweighs fundamentals.

In the infrastructure race, NWPX is not just a participant—it's a leader with the potential to outperform. Don't let the noise of a single quarter obscure the long-term opportunity.