IIIN Q1 Deep Dive: Shipment Growth and Tariffs Drive Margin Expansion

Steel wire manufacturer Insteel (NYSE:IIIN) announced better-than-expected revenue in Q2 CY2025, with sales up 23.4% year on year to $179.9 million. Its GAAP profit of $0.78 per share was 15.6% above analysts’ consensus estimates.

Is now the time to buy IIIN? Find out in our full research report (it’s free).

StockStory’s Take

Insteel’s first quarter results were met with a positive market response, as the company posted double-digit sales growth and outperformed Wall Street’s expectations on both revenue and earnings. Management attributed the robust performance to a sustained recovery in construction end markets, stronger shipment volumes, and effective integration of recently acquired facilities. CEO H.O. Waltz highlighted that the improved demand environment, alongside lower manufacturing costs and higher production output, contributed materially to the quarter’s operating margin expansion. Management also pointed to price increases as a response to escalating raw material costs, helping to offset inflationary pressures.

Looking forward, Insteel’s outlook is shaped by ongoing uncertainties related to U.S. trade and tariff policies, as well as potential tightness in domestic supply of steel wire rod—a key input. Management remains cautiously optimistic, citing a healthy order book and continued strong shipment trends into April. However, CEO H.O. Waltz emphasized that “the limiting factor...is going to be the availability of raw material,” and noted that while market conditions remain robust, broader macroeconomic indicators do not fully reflect on-the-ground demand. The company plans to respond to any cost increases from tariffs by adjusting selling prices, while closely monitoring supply chain dynamics and customer demand.

Key Insights from Management’s Remarks

Management credited shipment growth, improved end-market demand, and timely price adjustments for driving first quarter outperformance, while also highlighting the company’s response to ongoing tariff changes and supply chain constraints.

• Shipment volume acceleration: Management reported meaningful growth in shipment volumes across most construction end markets, which they attributed to both organic demand recovery and incremental tonnage from recent acquisitions.
• Tariff policy impact: The extension of Section 232 tariffs to finished products like PC strand has narrowed the cost disadvantage for Insteel versus offshore competitors. Waltz described this change as “a positive thing for Insteel,” noting it addresses a years-long cost imbalance caused by earlier tariff structures.
• Supply chain tightness: Ongoing tightness in domestic supply of hot-rolled steel wire rod remains a headwind, with recent mill closures and the reimposition of tariffs on Canadian and Mexican imports further tightening the market. Management has resorted to importing raw materials to ensure adequate supply, despite longer lead times and potential pricing risks.
• Manufacturing cost control: Lower manufacturing costs, improved production efficiency, and the integration of newly acquired assets all contributed to better operating margins. The company has also reduced its capital expenditure target for the year, reflecting the completion of integration activities and a focus on operational discipline.
• Disconnect with macro indicators: Despite strong company performance, management noted that traditional industry metrics—such as the Architectural Billing Index and Dodge Momentum Index—signal a more challenging broader environment. The company credits its outperformance to factors not captured by these indices, including direct customer feedback and backlog strength.

Drivers of Future Performance

Insteel expects market demand and raw material supply to be the primary factors influencing growth and profitability in the next several quarters.

• Raw material availability risk: Management flagged the availability of hot-rolled steel wire rod as a key risk, given recent supply constraints and the need to import material to meet production requirements. Any further tightening could limit shipment growth or increase costs.
• Tariff-driven pricing dynamics: The company expects to pass through any tariff-related cost increases to customers via higher selling prices. However, changes in U.S. trade policy or reciprocal tariffs on capital goods may introduce further uncertainty to margins.
• End-market demand health: While end-market demand, particularly in infrastructure and some commercial construction segments, has shown improvement, management remains cautious due to persistent weakness in certain macroeconomic indicators. The company is monitoring customer backlogs and construction spending trends to gauge sustainability of growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the stability of raw material supply, particularly as Insteel increases imports to offset domestic shortfalls; (2) management’s ability to pass through cost inflation from tariffs and maintain margins; and (3) signs of sustained demand in key end markets like infrastructure and commercial construction. Updates on integration of acquired assets and capital expenditure discipline will also be key performance indicators.

Insteel currently trades at $36.01, down from $38.43 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

Now Could Be The Perfect Time To Invest In These Stocks

Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.