It didn’t take long at all for Insteel (IIIN)
to show some divergence from my expectations for fiscal 2019, as the
company’s first quarter came in meaningfully lower than I expected on
weather-related shipment weakness in the quarter. Even so, the
conditions in the market remain quite challenging, and it sounds as
though the company will be sacrificing margins to maintain volume with
customers in 2019 and hoping for some tariff relief.
I’m
still comparatively less bullish on non-residential construction in
2019 than many, and I think that presents some risks to volumes and
overall earning expectations for Insteel. While I believe this company
is fundamentally well-run, the reality of competing against cheaper
imported product is a difficult one, and the possibility of
weaker-than-expected demand doesn’t help. I saw the possibility of 25%
or more downside in my last update, and the shares are down about 15%
from there. I do believe that has de-risked the investment case
somewhat, but my confidence in the acumen of Insteel’s management is
tempered by the ongoing risks presented by macro factors outside of
their control.
Click here for more:
Weaker Shipments Sap Insteel's First Quarter, And Margin Threats Remain
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