Worthington Steel reported net sales of $871.9 million for fiscal 2026 Q2, an 18% year‑over‑year increase that surpassed consensus revenue estimates of $783.0 million and $801.8 million from other analysts. The growth was driven by a 13% rise in direct‑sales volumes, with the newly acquired Sitem Group contributing roughly 2% of the increase, while toll‑processing volumes fell 24% after the Cleveland facility closed in May 2025.
Operating income rose to $21.7 million, up from $12.5 million in the same quarter a year earlier, reflecting higher direct‑sales mix and improved pricing power. Net earnings attributable to the controlling interest reached $18.8 million, translating to a GAAP earnings per diluted share of $0.37. Adjusted EPS, which excludes non‑recurring items, was $0.38, a 100% year‑over‑year jump from $0.19 in Q2 FY2025 but still $0.10 below the consensus adjusted EPS estimate of $0.48.
The company’s direct‑sales mix expanded to 65% of net sales from 55% a year earlier, while toll processing accounted for 35%. Direct volumes grew 13% driven by strong demand in automotive and energy segments, whereas toll volumes declined 24% due to the Cleveland closure and softer mill demand. The Sitem Group acquisition added a new European customer base and expanded electrical‑steel capabilities, contributing to the direct‑sales lift.
Gross margin increased by $13.2 million to $93.2 million, driven by higher direct spreads and a favorable inventory‑holding shift from a $13.4 million loss to a $7.2 million loss. The inventory shift reflects better inventory management and reduced carrying costs, while the higher direct spreads result from pricing power in high‑margin segments. However, compressed galvanized spreads and softer mill demand still exert pressure on overall margin expansion.
Management reiterated a cautious optimism for the remainder of fiscal 2026, noting that the company is “building a stronger, more resilient earnings profile even as markets remain mixed.” CEO Geoff Gilmore highlighted that the Sitem Group integration is progressing well and that expansion projects in Mexico and Canada are on schedule. While no specific quantitative guidance was issued, the company emphasized continued focus on higher‑value solutions and disciplined cost management.
Analysts noted that the revenue beat was driven by strong demand and market‑share gains, while the adjusted EPS miss reflected the impact of compressed spreads and the absence of a full‑year guidance update. The market reacted positively, with after‑hours trading showing a modest lift, indicating that investors valued the top‑line growth and strategic execution more than the EPS shortfall.
The results reinforce Worthington Steel’s strategic pivot toward higher‑margin, value‑added processing. The direct‑sales expansion, successful Sitem Group integration, and ongoing electrical‑steel projects position the company to capture growth in automotive and energy markets, while the Cleveland closure and toll‑volume decline highlight ongoing operational consolidation. The company’s focus on disciplined cost control and inventory management suggests a solid foundation for sustaining profitability in a mixed market environment.
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