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Friedman Stock Declines Post Q2 Earnings on Lower Sales, Demand
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Shares of Friedman Industries, Incorporated (FRD - Free Report) 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
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.
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Friedman Stock Declines Post Q2 Earnings on Lower Sales, Demand
Shares of Friedman Industries, Incorporated (FRD - Free Report) 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.