Shares of Friedman Industries, Incorporated FRD have lost 4.8% since the company reported its earnings for the quarter ended Sept. 30, 2024. This compares to the S&P 500 index’s -0.3% change over the same period. Over the past month, FRD has moved down by 3.2%, while the S&P 500 recorded a positive change of 3.3%, underscoring some challenges specific to the stock.
In the quarter that ended Sept. 30, 2024, Friedman reported net sales of approximately $106.8 million, a decline of 18.3% from $130.7 million in the year-ago period. The company also posted a net loss of $0.7 million, or a diluted loss per share of $0.10, against the net income of $3.5 million, or $0.48 per share, reported in the year-ago quarter. The decline in performance was attributed to a combination of softer demand and political uncertainty, which affected sales volumes.
Sales volume from inventory fell to about 121,500 tons, with an additional 18,000 tons of customer-owned material processed, compared with 129,500 tons and 26,000 tons, respectively, in the prior-year period. This indicates decline of 6.2% and 30.8%, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Other Key Business Metrics
The company’s flat-roll segment saw sales of approximately $97.4 million in second-quarter fiscal 2025, down 19.2% from $120.5 million a year earlier due to weaker demand among some customers and hesitancy among others, given the political uncertainty at the time. The segment’s average selling price per ton dropped 12.7% to $858 in second-quarter fiscal 2025 from $983 in the year-ago quarter, contributing to a decrease in profitability, though the segment managed to post an operating profit of $2.7 million, down 15.1% from $3.1 million.
Friedman Industries Inc. Price, Consensus and EPS Surprise
Friedman Industries Inc. price-consensus-eps-surprise-chart | Friedman Industries Inc. Quote
The tubular segment also faced challenges and reported sales of $9.4 million, down 8.2% from $10.2 million, and a 15.4% decrease in average selling price per ton from $1,217 to $1,030 in second-quarter fiscal 2025. The sales decreased due primarily to a decline in the average selling price per ton. Despite a slight increase in volume, this segment reported an operating loss of $0.6 million compared to break-even results last year.
Management Commentary
Michael J. Taylor, president and CEO, highlighted the impacts of both industry-specific and broader economic pressures, affecting margins amid industry-wide pricing pressure and a lack of pricing momentum. Although hot-rolled coil (HRC) prices stabilized, demand remained soft due to customer hesitancy linked to macroeconomic and political uncertainties. This stability in HRC prices led to a reduced need for hedging activities during the quarter, which were previously used to mitigate inventory price risks. Taylor expressed optimism for Friedman’s long-term position, citing the company’s debt reduction of 22% during the quarter and a solid working capital base of $111.7 million as strong foundations for future growth.
Factors Influencing Results
The company’s operating environment was particularly impacted by fluctuating HRC prices. HRC, a critical input, has seen price volatility since the start of 2024, which compressed physical margins earlier in the year. The company’s risk management through hedging activities yielded a smaller gain of $0.2 million this quarter, reflecting the reduced volatility. However, the limited price movement of HRC was favorable to Friedman’s cost management over the quarter, allowing for a steady hold on inventory costs without significant hedging expenses. Additionally, reduced operating expenses, including a 16.8% decrease in selling, general, and administrative costs, reflected the company’s response to weaker earnings.
Outlook
Looking forward, Friedman anticipates a slight decline in sales volume for the third quarter, typically affected by seasonal holiday slowdowns. With HRC prices stabilizing at the start of the new quarter, the company expects a “challenging margin environment” due to limited upward momentum in steel prices. However, Taylor expressed confidence in the company’s strong financial position and its preparedness to seize both immediate and long-term market opportunities.
Other Developments
During this quarter, Friedman took significant steps in financial management by reducing its debt by 22%, enhancing its financial flexibility to navigate uncertain market conditions. Additionally, no acquisitions, divestitures, or major restructuring activities were noted, which aligned with a cautious but steady approach in the current economic climate.
Research Chief Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
Friedman Industries Inc. (FRD): Free Stock Analysis Report
