Shares of Friedman Industries, Incorporated (FRD Quick QuoteFRD - Free Report) have lost 3.2% since the company released its earnings results for the quarter ended March 31, 2025. This underperformance compares to a 0.7% dip in the S&P 500 Index over the same period. However, over the past month, Friedman Industries’ stock showed a slight gain of 0.5%, trailing the S&P 500’s 0.9% advance.

FRD’s Earnings and Revenue Snapshot

For the fourth quarter of fiscal 2025, Friedman Industries reported net earnings of $5.3 million, or $0.76 per diluted share, marking a 7.8% increase from $4.9 million, or $0.71 per share, in the year-ago period. Despite a 2.3% dip in quarterly sales to $129.2 million from $132.2 million, the company achieved record quarterly sales volume of 166,500 tons, a 4.7% year-over-year rise and a 28% sequential increase compared to the third quarter. Notably, steel prices rose 35% in the quarter, aiding margin expansion. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

On a full-year basis, however, performance lagged. Fiscal 2025 net earnings plunged 64.9% to $6.1 million ($0.87 per diluted share) from $17.3 million ($2.39 per share) in fiscal 2024. Annual sales dropped 13.9% to $444.6 million from $516.3 million. The downturn reflected a challenging pricing environment in the first three quarters, partially offset by margin recovery in the final quarter.

Segmentally, the flat-roll contributed $117.7 million in sales for the fiscal fourth quarter, 2.4% lower than $120.6 million in the year-ago quarter. Although tons sold from inventory rose 15.8% to 139,000 from 120,000, toll processing volumes fell 44.1% to 16,500 tons from 29,500. The average selling price dropped 15.8% from $993 per ton to $836 per ton. Operating income from the segment fell to $7.1 million from $9.6 million.

Meanwhile, the tubular segment generated $11.5 million in sales, nearly flat year over year. However, volume rose 15.8% to 11,000 tons from 9,500 tons, while the average selling price declined 14.1% to $1,044 per ton from $1,216 per ton. Operating earnings in this unit dropped to $0.6 million from $0.8 million.

Friedman Industries’ Hedging and Other Key Business Metrics

Friedman Industries continued to benefit from its hedging program, recording a $1.8 million gain from hot-rolled coil futures during the fourth quarter of fiscal 2025 and $7.6 million for the full fiscal year. These gains were instrumental in offsetting price volatility in the steel market. The company uses mark-to-market accounting for hedges, which can sometimes cause timing mismatches between physical sales and hedge impacts.

Management noted that its hedging capabilities played a crucial role in stabilizing margins during a turbulent year for steel pricing. This approach has also supported consistent financial outcomes amid broader macroeconomic pressures.

Additionally, cost control efforts were evident across various expense lines. Selling, general and administrative (SG&A) expenses dropped 37.5% to $3.8 million in the quarter from $6.1 million a year earlier. Similarly, full-year SG&A expenses declined 23.1% to $16.2 million from $21 million, contributing to earnings resilience amid declining revenue.

FRD’s Management Commentary and Strategic Execution

CEO Michael J. Taylor emphasized that the company’s fourth-quarter fiscal 2025 margin recovery and record sales volume were the results of disciplined execution of its growth strategy. He highlighted a 28% sequential increase in quarterly sales volume and a 4.7% rise year over year. Taylor also credited FRD’s newest facility in Sinton, TX, for delivering the highest profit margin among all locations, as it reached full production capacity during the year.

Friedman Industries’ strategic transformation continues, with enhanced processing capabilities across its facilities and a steady focus on operational efficiencies.

Friedman Industries’ Forward Guidance

Looking ahead, Friedman Industries expects sales volume in the first quarter of fiscal 2026 to be slightly lower than in the fourth quarter of fiscal 2025 due to planned equipment downtime. However, the company anticipates improved margins, reflecting continued benefits from pricing actions and operational streamlining. Management expressed confidence in capitalizing on both near- and long-term growth opportunities, citing favorable industry demand and a strong balance sheet.

FRD’s Other Developments

There were no reported acquisitions, divestitures or restructuring initiatives in the fourth quarter of fiscal 2025. However, management reaffirmed its commitment to disciplined capital allocation, highlighting past stock repurchases and a continued quarterly dividend policy since 1972.