Friedman (FRD) Q1 Profit Jumps 92%

Key Points

• Driven by higher flat-roll steel sales volumes

• while net earnings (GAAP) nearly doubled to $5.0 million

• These 10 stocks could mint the next wave of millionaires ›

Friedman Industries (NASDAQ:FRD), a steel manufacturer and processor, released its results for the first quarter of fiscal 2026 on August 7, 2025. Revenue (GAAP) was $134.8 million, as the company saw healthy sales volumes especially in its flat-roll steel business. Net earnings (GAAP) nearly doubled to $5.0 million, and diluted earnings per share reached $0.71 (GAAP), compared to $0.37 (GAAP) in Q1 fiscal 2025. There were no analyst estimates to compare against these results. The quarter showed significant improvements in core operations and profitability, highlighting anticipated pressure from falling steel prices and signaling a prudent outlook for the months ahead.

Company Overview and Success Drivers

Friedman Industries is a manufacturer and processor of steel products, operating two main segments: flat-roll products and tubular products. Flat-roll products include hot-rolled steel sheets and plates, which the company processes for other manufacturers and distributors. Tubular products consist of steel pipes manufactured to meet industry standards.

The company’s recent focus has been on driving higher volumes, increasing operational efficiency across its plants, and broadening its customer network. Efficiently processing inventory, and offering rapid turnaround to customers are also priorities.

Quarter Highlights and Financial Developments

With 141,500 tons sold in Q1 fiscal 2026, compared to 119,000 tons in Q1 fiscal 2025, the flat-roll segment was the standout, generating 92% of total revenue in fiscal 2024. This growth was driven primarily by higher shipment volumes rather than increased selling prices, as the average price for flat-roll inventory edged down slightly to $926 per ton in Q1 fiscal 2026, from $932 per ton in Q1 fiscal 2025.

The company posted operating cash flow of $15.5 million and reduced debt by $14.7 million, strengthening its balance sheet and liquidity. Inventory and toll processing together accounted for over 160,000 tons processed, although toll processing volume, which involves cutting or shaping customer-owned steel, declined slightly.

Hedging activities produced a much smaller gain in Q1 fiscal 2026—$0.3 million, compared to $5.375 million in Q1 fiscal 2025. This means that core operations, not risk management gains, made up the majority of the company's earnings improvement. The company maintained its focus on increasing capacity utilization at its facilities and managing operational costs as part of its ongoing strategy.

Business Model and Key Success Factors

The flat-roll segment—steel sheets and plates prepared for further manufacturing—remains central to the business, accounting for the vast majority of sales. Customers include steel distributors and manufacturers in construction, energy, and general manufacturing. Friedman Industries operates multiple advanced facilities, allowing it to vary thickness and widths and meet exacting industry standards. This processing capability is a core competitive factor, helping to serve a diverse and growing customer base by adapting to specific orders and reducing customer lead time.

The tubular segment produces steel pipe for line pipe, oil country pipe, and structural applications. Here, the company has worked to regain profitability after last year's loss by both capturing higher prices per ton and executing operational improvements. The flat-roll segment’s dominance in revenue—accounting for 91% of total sales in fiscal 2025 and 92% in fiscal 2024—signals risk if industry conditions for that segment worsen. Ensuring a reliable supply and keeping pricing competitive are key, especially given the risks involved in using a limited set of suppliers. A broad customer portfolio—over 440 in flat-roll and 80 in tubular—mitigates risk from reliance on a single buyer, supporting more stable revenue streams.

Looking Ahead: Outlook and Investor Watchpoints

Management expects a slight increase in shipped volume for Q2 fiscal 2026 as facility utilization continues to improve. However, management indicated that margins are likely to contract in Q2 fiscal 2026, citing softening prices for Hot-Rolled Coil steel, which began impacting results toward the end of Q1 fiscal 2026. No updates to forward guidance on annual figures or explicit long-term financial targets were provided.

Factors to watch in upcoming quarters include price trends for core steel products and whether the company can maintain the recent momentum in both flat-roll and tubular profitability. Ongoing supplier concentration remains a structural risk for operations, as the company sources inventory for both its flat-roll and tubular segments from a limited number of suppliers, as does the company’s relatively high reliance on the flat-roll business for its top line. Friedman Industries does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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