Core Viewpoint - Insteel Industries (IIIN) is currently viewed as a better value opportunity compared to Carpenter Technology (CRS) based on various valuation metrics and earnings outlooks [1]. Group 1: Zacks Rank and Earnings Outlook - Both IIIN and CRS have a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions for both companies [3]. - The improving earnings outlook for both stocks provides a level of comfort for investors [3]. Group 2: Valuation Metrics - IIIN has a forward P/E ratio of 11.56, significantly lower than CRS's forward P/E of 33.21 [5]. - The PEG ratio for IIIN is 0.96, while CRS has a PEG ratio of 1.34, suggesting that IIIN may offer better value relative to its expected earnings growth [5]. - IIIN's P/B ratio stands at 1.9, compared to CRS's P/B of 8.5, further indicating that IIIN is undervalued [6]. - Based on these valuation figures, IIIN earns a Value grade of B, while CRS receives a Value grade of D [6].

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Core Insights - Insteel Industries reported a strong start to fiscal 2026, with a year-over-year shipment increase of 3.8% driven by improved demand in commercial and infrastructure markets and contributions from acquisitions [1][3] - The company's net earnings rose significantly to $7.6 million, or $0.39 per share, compared to $1.1 million, or $0.06 per share, in the prior-year period, benefiting from improved demand and a wider spread between selling prices and raw material costs [2][6] - Management anticipates a strong year ahead, supported by the Infrastructure Investment and Jobs Act (IIJA) and robust data center activity, despite uncertainties related to trade policy and domestic supply constraints [4][15] Financial Performance - Net earnings increased to $7.6 million from $1.1 million a year ago, with shipments up 3.8% year-over-year and average selling prices climbing 18.8% [2][6] - Gross profit rose to $18.1 million, with gross margin expanding to 11.3% from 7.3%, driven by higher shipment volumes and lower unit manufacturing costs [8] - SG&A expenses increased to $8.8 million, or 5.5% of net sales, primarily due to higher incentive compensation reflecting stronger financial performance [9] Inventory and Working Capital - The company experienced a $34.5 million increase in inventory, leading to a net working capital consumption of $16.6 million, attributed to higher raw material purchases [5][10] - Quarter-end inventory represented about 3.9 months of shipments, up from 3.5 months at the end of the fourth quarter, with expectations for moderation as purchasing normalizes [11] - Insteel's net working capital has risen by over $50 million in the last 12 months, with ongoing imports expected until domestic availability improves [18] Market Outlook - Management sees demand supported by the IIJA and data center construction, with expectations for continued robust activity into 2027 [15][16] - The Architecture Billings Index indicates contraction in nonresidential construction, while the Dodge Momentum Index showed a 50% year-over-year increase, particularly in commercial planning [13][14] - CEO highlighted the impact of tariff policies on domestic wire rod prices, which are significantly higher than global prices, contributing to supply constraints [17] Capital Expenditures and Shareholder Returns - Insteel plans to invest $20 million in capital expenditures to support growth and reduce production costs, with a focus on technology investments [20] - The company returned capital to shareholders through a $1 per share special cash dividend and repurchased $745,000 of common stock [12]

Financial Performance - Net sales for the first quarter of 2026 increased 23.3% to $159.9 million from $129.7 million in the prior year quarter, driven by an 18.8% increase in average selling prices and a 3.8% increase in shipments[85]. - Gross profit for the first quarter of 2026 increased 89.5% to $18.1 million, representing 11.3% of net sales, compared to $9.5 million or 7.3% of net sales in the prior year quarter[86]. - Net earnings for the first quarter of 2026 rose to $7.6 million ($0.39 per share) from $1.1 million ($0.06 per share) in the prior year quarter, primarily due to increased gross profit and lower restructuring charges[92]. Expenses - Selling, general and administrative expenses increased 11.1% to $8.8 million, or 5.5% of net sales, from $7.9 million, or 6.1% of net sales in the prior year quarter[87]. - The effective income tax rate decreased to 21.0% from 26.1% in the prior year quarter, driven by a reduction in the valuation allowance on deferred tax assets[91]. Cash Flow and Capital Expenditures - Cash used for operating activities was $701,000 during the first quarter of 2026, primarily due to a net increase in working capital[96]. - Investing activities used $1.6 million of cash during the first quarter of 2026, significantly lower than $73.9 million in the prior year, mainly due to the EWP and OWP acquisitions[99]. - Financing activities used $20.7 million of cash during the first quarter of 2026, including $20.0 million for dividend payments[101]. - The company expects cash and cash equivalents, along with cash generated from operating activities, to be sufficient for working capital and capital expenditures in both the short- and long-term[104]. Acquisitions - The company acquired Engineered Wire Products, Inc. for an adjusted purchase price of $67.0 million and O'Brien Wire Products of Texas, Inc. for $5.1 million[81][82]. Market Conditions - Demand in the company's markets is seasonal and cyclical, with higher shipments and profitability typically in the third and fourth quarters[106]. - Inflation did not materially impact sales or earnings during the first quarter of fiscal 2026, but future increases in raw material costs remain uncertain[107]. - The company anticipates strong performance for the remainder of fiscal 2026, driven by positive customer sentiment and demand in core markets[111]. - Approximately 10% of the company's revenues are directly affected by import competition, with concerns about the significant steel price premium in the U.S.[112]. Cost Management - The company is focused on managing expenses, realizing synergies from acquisitions, and improving productivity to minimize operating costs[113]. - A 10% increase in the price of wire rod would have resulted in a $9.8 million decrease in pre-tax earnings, assuming no change in selling prices[116]. Financing and Credit - The company has a $100.0 million revolving credit facility, with $98.7 million of borrowing capacity available as of December 27, 2025[103]. - Future borrowings under the credit facility are subject to variable interest rates, making them sensitive to changes in interest rates[117]. - The company has not typically hedged foreign currency exposures, as such transactions have not been material historically[118].

Financial Data and Key Metrics Changes - Net earnings for the first quarter rose to $7.6 million or $0.39 per share, compared to $1.1 million or $0.06 per share in the same period last year [5] - Gross profit improved to $18.1 million from $9.5 million a year ago, with gross margin expanding to 11.3% from 7.3% [8] - SG&A expenses increased to $8.8 million, or 5.5% of net sales, compared to $7.9 million, or 6.1% of net sales, in the prior year [8][9] - Effective tax rate decreased to 21% from 26.1% in the prior year [9] Business Line Data and Key Metrics Changes - First quarter shipments increased by 3.8% year-over-year, reflecting improved demand across commercial and infrastructure markets [5][6] - Average selling prices increased by 18.8% year-over-year due to pricing actions taken to offset higher steel wire rod costs [6] Market Data and Key Metrics Changes - The Architecture Billings Index (ABI) registered 45.3, indicating a contraction in non-residential commercial construction activity for 13 consecutive months [12] - The Dodge Momentum Index rose 7% in December, with a year-over-year increase of 50%, indicating strengthening activity in commercial planning [13] Company Strategy and Development Direction - The company is optimistic about 2026, driven by demand from the Infrastructure Investment and Jobs Act (IIJA) and data center construction [3][16] - The company plans to invest approximately $20 million in capital expenditures to support growth and reduce production costs [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges uncertainties due to trade policies and economic conditions but remains confident in demand trends and customer conversations [14][16] - The company expects to continue importing raw materials until domestic availability improves, impacting net working capital [22][23] Other Important Information - The company returned $19.4 million to shareholders through a special cash dividend and continued share buybacks [12] - Cash flow from operations used $700,000 in the quarter, compared to providing $19 million last year, primarily due to increased inventories [10] Q&A Session Summary Question: Can you provide more details on commitments related to data center projects? - Management noted that the data center business is new but is seeing repeat opportunities and robust demand [27] Question: How have wire rod constraints affected volumes? - Management explained that inventory growth was due to insufficient domestic wire rod supply, necessitating offshore purchases [29] Question: Are you realizing SG&A leverage from recent acquisitions? - Management confirmed that synergies from acquisitions are being realized, contributing to improved performance [31] Question: What has allowed the company to grow despite industry headwinds? - Management attributed growth to internal factors such as work in the cast-in-place market and acquisitions [38] Question: What is the outlook for the residential market? - Management indicated that any meaningful impact from the residential market is unlikely for 2026 [45] Question: How are labor costs being managed? - Management acknowledged upward pressure on labor costs and inflationary impacts on operations [46]

Financial Data and Key Metrics Changes - Net earnings for the first quarter rose to $7.6 million or $0.39 per share, compared to $1.1 million or $0.06 per share in the same period last year [5] - Gross profit improved to $18.1 million from $9.5 million a year ago, with gross margin expanding to 11.3% from 7.3% [8] - Average selling prices increased by 18.8% year over year, reflecting pricing actions taken to offset higher costs [6] Business Line Data and Key Metrics Changes - First quarter shipments increased by 3.8% year over year, reflecting improved demand across commercial and infrastructure markets [5][6] - SG&A expenses rose to $8.8 million, or 5.5% of net sales, compared to $7.9 million, or 6.1% of net sales, in the prior year [8][9] Market Data and Key Metrics Changes - The Architectural Billings Index (ABI) registered 45.3, indicating a contraction in nonresidential commercial construction activity for 13 consecutive months [12] - The Dodge Momentum Index rose 7% in December, with a year-over-year increase of 50%, indicating some strengthening in commercial planning [13] Company Strategy and Development Direction - The company is encouraged by the demand driven by the Infrastructure Investment and Jobs Act (IIJA) and expects robust demand from data center construction [16][17] - The company plans to invest approximately $20 million in capital expenditures to support growth and reduce production costs [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges uncertainties due to trade policies and economic conditions but remains optimistic about demand trends [3][25] - The company expects to continue importing raw materials until domestic supply improves, impacting net working capital [22][23] Other Important Information - The company returned $19.4 million to shareholders through a special cash dividend and continued share buybacks [12] - Cash flow from operations used $700,000 in the quarter, compared to providing $19 million last year, primarily due to increased inventories [10] Q&A Session Summary Question: Can you provide more details on commitments related to data center projects? - Management noted that the data center business is new and they are seeing repeat opportunities and robust demand [27] Question: How have wire rod constraints affected volumes? - Management explained that inventory growth was due to insufficient domestic wire rod supply, leading to offshore purchases [29] Question: Are you realizing SG&A leverage from recent acquisitions? - Management confirmed that synergies from acquisitions are being realized, contributing to improved performance [31] Question: What has allowed the company to grow despite industry headwinds? - Management attributed growth to internal factors such as work in the cast-in-place market and acquisitions [38] Question: How quickly can the residential market turn beneficial for the company? - Management indicated that any meaningful impact from the residential market is unlikely for 2026 [45] Question: What is the outlook on labor costs? - Management acknowledged upward pressure on labor costs and inflationary impacts on operations [46]

Financial Data and Key Metrics Changes - Net earnings for Q1 2026 rose to $7.6 million or $0.39 per share, compared to $1.1 million or $0.06 per share in the same period last year [4] - Gross profit improved to $18.1 million from $9.5 million a year ago, with gross margin expanding to 11.3% from 7.3% [6] - SG&A expenses increased to $8.8 million, or 5.5% of net sales, compared to $7.9 million, or 6.1% of net sales, in the prior year [6][7] - Effective tax rate decreased to 21% from 26.1% in the prior year [7] Business Line Data and Key Metrics Changes - First quarter shipments increased by 3.8% year over year, reflecting improved demand across commercial and infrastructure markets [4][5] - Average selling prices increased by 18.8% year over year due to pricing actions taken to offset higher steel wire rod costs [5] Market Data and Key Metrics Changes - The Architectural Billings Index (ABI) registered 45.3, indicating a contraction in nonresidential commercial construction activity for 13 consecutive months [10] - The Dodge Momentum Index rose 7% in December, with a year-over-year increase of 50%, indicating strengthening activity in commercial planning [11] Company Strategy and Development Direction - The company is optimistic about 2026, driven by demand from the Infrastructure Investment and Jobs Act (IIJA) and data center construction [3][15] - The company plans to invest approximately $20 million in capital expenditures to support growth and reduce production costs [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledges uncertainties due to trade policies and economic conditions but remains confident in the demand trends observed [3][12] - The company expects inventory levels to moderate as purchasing activity normalizes and shipment volumes increase [9][19] Other Important Information - The company returned $19.4 million to shareholders through a special cash dividend and continued share buybacks [10] - Cash flow from operations used $700,000 in the quarter, compared to providing $19 million last year, primarily due to increased inventories [8] Q&A Session Summary Question: Can you provide more details on commitments related to data center projects? - Management noted that the data center business is new to the company, but they are seeing repeat opportunities and robust demand [22][23] Question: How have wire rod constraints affected volumes? - Management explained that inventory growth was due to insufficient domestic wire rod supply, leading to offshore purchases [24][25] Question: Are you realizing SG&A leverage from recent acquisitions? - Management confirmed that they have realized expected synergies from acquisitions, contributing to improved performance [28] Question: What has allowed the company to grow despite industry headwinds? - Management attributed growth to internal factors such as work in the cast-in-place market and successful acquisitions [34][35] Question: What is the outlook for the residential market? - Management indicated that any meaningful impact from the residential market is unlikely for 2026 [40][41] Question: How are labor costs being managed? - Management acknowledged upward pressure on labor costs and inflationary impacts on operations [42][43]

Business Overview - The company primarily manufactures and markets steel wire reinforcing products for concrete construction applications, focusing on Welded Wire Reinforcement (WWR) and Prestressed Concrete Strand (PC Strand) [15] - In 2025, PC Strand accounted for 66% of sales, while Welded Wire Reinforcement represented 34% [13] - Distributors account for 70% of sales, while Rebar Fabricators, Contractors, and Concrete Product Manufacturers make up the remaining 30% [17] - Nonresidential construction accounts for 85% of sales, while residential construction accounts for 15% [17] Growth Strategy - The company aims to convert rebar users to Engineered Structural Mesh (ESM), leveraging manufacturing and engineering capabilities [47] - The company acquired O'Brien Wire Products for $5.1 million in November 2024 and Engineered Wire Products for $67.0 million in October 2024 [49] Financial Performance - As of December 27, 2025, the company had $15.6 million in cash and no borrowings outstanding on its $100.0 million revolving credit facility [94] - Capital expenditures are expected to total approximately $20.0 million in fiscal year 2026 [90] - The company is currently paying a regular quarterly cash dividend of $0.03 per share [96] - The company repurchased $2.3 million of shares in FY 2025 and $0.7 million year-to-date in FY 2026 [100] Market Outlook - In November 2025, the Architecture Billings Index (ABI) registered 45.3, indicating a contraction in activity [104] - The Dodge Momentum Index (DMI) increased 7.0% in December 2025, signaling strengthening activity [104] - Approximately 10% of the company's revenues are directly affected by import competition [106]

Financial Performance - Net earnings for Q1 2026 increased to $7.6 million, or $0.39 per share, compared to $1.1 million, or $0.06 per share in the prior year quarter [4]. - Net earnings for the three months ended December 27, 2025, were $7,593 million, a significant increase from $1,081 million in the same period last year [26]. - Gross margin expanded by 400 basis points to 11.3% from 7.3% in the prior year quarter, attributed to wider spreads, higher shipment volumes, and lower unit manufacturing costs [5]. Sales and Revenue - Net sales rose by 23.3% to $159.9 million from $129.7 million in the prior year quarter, driven by an 18.8% increase in average selling prices and a 3.8% rise in shipments [5]. - Accounts receivable increased to $14,118 million from $8,866 million year-over-year, indicating a growth in sales [26]. Cash Flow and Dividends - Operating activities used $0.7 million of cash during the quarter, a significant decrease from generating $19.0 million in the prior year quarter, primarily due to changes in net working capital [6]. - The company paid a special cash dividend totaling $19.4 million, or $1.00 per share, in addition to its regular quarterly cash dividend of $0.03 per share [10]. - Cash dividends paid amounted to $19,978 million, slightly down from $20,014 million in the same period last year [26]. Capital Expenditures and Investments - Capital expenditures for Q1 2026 decreased to $1.5 million from $2.7 million in the prior year quarter, with total expected capital outlays for fiscal 2026 around $20.0 million [9]. - Cash flows from investing activities showed a net cash used of $1,617 million, down from $73,939 million in the previous year, primarily due to the acquisition of businesses [26]. Financial Position - The company ended the quarter with a net cash balance of $15.6 million and no debt outstanding [8]. - Cash and cash equivalents at the end of the period were $15,589 million, down from $35,951 million at the end of the same period last year [26]. - The net decrease in cash and cash equivalents was $23,041 million, compared to a decrease of $75,587 million in the prior year [26]. Market Outlook - Positive momentum is noted with a strengthening outlook, despite concerns about the competitive steel price premium in the U.S. relative to the global market [11]. - The company anticipates solid opportunities in 2026, supported by infrastructure spending and data center activity, despite softening residential markets [11]. - Approximately 10% of revenues are directly affected by import competition, indicating a relatively insulated position against global market fluctuations [11]. Inventory and Expenses - Inventories saw a significant decrease of $34,511 million, contrasting with an increase of $2,640 million in the previous year [26]. - The company reported stock-based compensation expense of $441 million, up from $345 million in the prior year [26]. - The principal payments on long-term debt remained consistent at $67 million, matching the previous year's figure [26].

Core Viewpoint - Insteel Industries Inc. reported a significant increase in net earnings and net sales for the first quarter of fiscal 2026, driven by strong demand for concrete reinforcement products and effective pricing strategies to offset rising costs [3][4][9]. Financial Performance - Net earnings for Q1 2026 rose to $7.6 million, or $0.39 per share, compared to $1.1 million, or $0.06 per share, in the same quarter last year [3][9]. - Net sales increased by 23.3% to $159.9 million from $129.7 million in the prior year quarter, attributed to an 18.8% rise in average selling prices and a 3.8% increase in shipments [4][9]. - Gross margin expanded by 400 basis points to 11.3% from 7.3% in the prior year quarter, driven by wider spreads and higher shipment volumes [4]. Cash Flow and Capital Allocation - Operating activities used $0.7 million in cash during the quarter, a decrease from generating $19.0 million in the prior year quarter, primarily due to changes in net working capital [5]. - Capital expenditures for Q1 2026 decreased to $1.5 million from $2.7 million in the prior year quarter, with total expected capital outlays for fiscal 2026 around $20.0 million [6]. Dividends and Liquidity - On December 12, 2025, Insteel paid a special cash dividend of $19.4 million, or $1.00 per share, in addition to its regular quarterly cash dividend of $0.03 per share [7][9]. - The company ended the quarter with a cash balance of $15.6 million and no outstanding borrowings on its $100.0 million revolving credit facility [7][9]. Market Outlook - Despite indications of softening construction activity, Insteel's markets remained resilient, with nonresidential construction driving demand supported by infrastructure spending [8][10]. - The company remains optimistic about 2026, expecting solid opportunities despite concerns over competitive pressures from imported products [10].