Friedman Industries Stock Gains Following Strong Q1 Earnings Results

Core Insights - Friedman Industries' shares have increased by 14.8% since the earnings report for the quarter ended June 30, 2025, significantly outperforming the S&P 500 Index's 0.5% growth during the same period [1] - The company reported net earnings of $5 million, or $0.71 per diluted share, for the first quarter of fiscal 2026, compared to $2.6 million, or $0.37 per diluted share, a year earlier [2] - Net sales reached $134.8 million, reflecting a 17.7% increase from $114.6 million in the prior-year quarter [2] Financial Performance - The flat-roll division generated sales of $124.1 million, up 20% from $103.4 million, with operating income rising to $8.8 million from $2.7 million [3] - The tubular segment experienced a 4.1% sales decline to $10.7 million from $11.2 million, but operating results improved from a $1.2 million loss to a $1.3 million profit [3] - Adjusted gross profit increased by 60.3% to $29.1 million from $18.1 million, with margins expanding from 15.8% to 21.6% [4] Cash Flow and Debt Management - Operating cash flow was reported at $15.5 million, allowing for a $14.7 million reduction in debt [4] - The company ended the quarter with $117.5 million in working capital and a current ratio of 3.9 [4] - Debt under the $150 million asset-based lending facility stood at $33 million at quarter-end [4] Management Insights - CEO Michael J. Taylor emphasized improved margins and solid sales volume as key drivers of the strong fiscal first-quarter performance [5] - Taylor noted strengthened demand from certain customers and strategic efforts that enhanced facility capacity utilization [5] - The management expressed optimism about the long-term demand outlook for the industry [5] Market Conditions - The improved profitability was attributed to favorable market conditions for hot-rolled steel coil (HRC) compared to the prior-year period [6] - Although HRC prices softened slightly towards the end of the quarter, they remained stable enough to support stronger physical margins [6] - Hedging activities contributed positively, with a recorded gain of $0.3 million compared to a $5.4 million gain in the prior-year quarter [6] Future Guidance - For the second quarter of fiscal 2026, Friedman Industries expects sales volumes to be slightly higher than in the fiscal first quarter [7] - Management anticipates lower margins sequentially due to recent softening in HRC prices [7] Other Developments - On May 6, 2025, the company executed the fourth amendment to its credit agreement, extending the maturity date of its $150 million ABL Facility to August 19, 2026 [8] - The facility remains secured by substantially all of the company's assets, providing flexibility for future borrowing [8]