Insteel Industries, Inc.

Third-quarter net earnings were $9 million, or $0.46 per share, versus $15.2 million, or $0.78 per share, in the prior-year quarter. Gross profit declined to $10.8 million and gross margin contracted 690 basis points to 10.2% from 17.1%, while SG&A fell to $8.5 million, or 4.3% of net sales, from $10.6 million, or 5.9% of net sales. Shipments increased 1.7% year over year and average selling prices rose 8.1% year over year and 2.3% sequentially. Operating cash flow was $13.7 million; the company ended with $22.9 million of cash and no borrowings. For Q4, management expects gross margins to remain near current levels with potential modest improvement, inventories to decline modestly, and effective tax rate to run close to 23%. Full-year capital expenditures are now expected to be approximately $15 million, down from the prior estimate of $20 million.

Howard Woltz said the business is being held back by inflation, especially freight and other operating costs, and by timing delays on large projects, particularly data centers. He emphasized that the company is not seeing cancellations, only delays, and expects shipments to accelerate in the current quarter and remain strong through the end of the calendar year. He was constructive on Insteel’s positioning in larger strategic projects and said the company intends to target applications where speed of construction matters, while also continuing to pursue organic and acquisition growth.

Scot Jafroodi said higher average selling prices and improved shipment activity were more than offset by higher costs, leading to the earnings decline. He cited gross margin compression to 10.2% from 17.1% due to a narrower spread between selling prices and raw material costs, higher freight and manufacturing costs, and lower production volumes that raised unit conversion costs. On the balance sheet, he said operating cash flow was $13.7 million, inventories were up $7.9 million, accounts payable and accrued expenses rose $7.8 million, and the company finished with $22.9 million of cash and no debt. He also noted capex of $3.2 million in the quarter, revised full-year capex of about $15 million, and a modest inventory decline expected in Q4.

Analysts focused on whether delayed data center shipments were still coming and how long the revenue stream could last. Management confirmed the delays, said shipments should pick up in the current quarter, and repeated that the projects are timing-related rather than canceled. Questions also probed pricing power and the recent price increase; management said there have been multiple increases through fiscal 2026, with the latest effective July 13, but that passing through inflation remains difficult in a not-bullishly-strong market. On tariff refunds, management said they will record them when received but do not expect them soon because of filing and legal timing issues.