FRD Stock Price Increases 22.13% After Hours: Why It Happened

By Amit Chowdhry ● February 23, 2021
  • The stock price of Friedman Industries Inc (NYSEAMERICAN: FRD) increased 22.13% after hours. This is why it happened.

The stock price of Friedman Industries Inc (NYSEAMERICAN: FRD) increased 22.13% after hours as it went from a closing price of $7.41 to $9.05. Investors are responding to Friedman Industries announcing its third-quarter results.

Friedman Industries announced that for the quarter ended December 31, 2020, the company recorded net earnings of $2,129,745 ($0.30 diluted earnings per share) on sales of $28,502,049 compared to a net loss of $881,003 ($0.13 diluted loss per share) on net sales of $28,150,817 for the quarter ended December 31, 2019.

Friedman Industries’ operating results are significantly impacted by the market price of hot-rolled steel coil and the 2020 quarter benefitted from a rapid and significant increase in price. And during August 2020 hot-rolled steel pricing started to rise and as of the end of the 2020 quarter, pricing had increased approximately 124%. Plus the results for the 2020 quarter also benefitted from gains on hot-rolled steel derivative contracts of approximately $397,000. The operating results for the 2019 quarter were negatively impacted by declining steel prices preceding the quarter and during part of the quarter.

Friedman Industries continued the previously announced capital expenditure project at its Decatur, Alabama facility during the 2020 quarter. And this project involves the purchase and installation of a stretcher leveler coil processing line. This newly acquired equipment will allow the Decatur location and the company’s overall coil segment to process material that is thicker, wider, and higher strength. Plus material that has been leveled by the stretcher leveling process is preferable to certain customers and applications compared to material that has been leveled by the temper mill process. The installation of the new equipment began in December 2020 and Friedman Industries expects commercial use of the equipment to begin in March 2021. Friedman Industries currently estimates the cost of this project to be $7,200,000. As of December 31, 2020, expenditures related to the Decatur project totaled $6,478,594 with this amount reported as “Construction in process” on the company’s consolidated balance sheet.

On June 25, 2020, our Board of Directors authorized a share repurchase program under which Friedman Industries may repurchase up to 1,062,067 shares of the company’s outstanding common stock through June 30, 2023 — which equates to 15% of the company’s outstanding shares of common stock as of June 25, 2020. As of December 31, 2020, we have repurchased 180,200 shares at a total cost of $1,143,356 under the program.

During August 2020 hot-rolled steel pricing started to rise and has continued a significant increase of approximately 165% as of the date of this press release. Friedman Industries’ coil segment margins experienced improvement throughout the third quarter and we expect the fourth quarter to have strong margins. And Friedman Industries’ tubular segment margins do not respond as quickly to the fluctuations in steel price but we did see significant improvement in December 2020 and we expect that margin strength to continue during the fourth quarter. Friedman Industries expects both coil segment and tubular segment sales volumes for the fourth quarter to be slightly higher than the third quarter volumes.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.