Shares of Smith-Midland Corporation SMID have gained 9.9% since reporting results for the first quarter of 2025. This compares to the S&P 500 index’s 0.1% rise over the same time frame. Over the past month, the stock has rallied 27.2%, significantly outperforming the S&P 500 advanced 3.7%.
In its most recent quarterly results, Smith-Midland reported revenues of $22.7 million for the three months ended March 31, 2025, representing a 35% increase from $16.8 million in the same period a year ago. The revenue surge was driven primarily by service-related income, particularly from a large special barrier rental project.
Net income nearly tripled to $3.3 million, or 62 cents per diluted share, from $1.1 million, or 21 cents per diluted share, in the first quarter of 2024. Gross profit rose from $3.9 million to $7 million, with the gross margin expanding 740 basis points to 30.7% over the prior-year period. Operating income for the quarter climbed to $4.4 million from $1.5 million last year, as the company benefited from increased revenues and improved cost efficiency.
Smith-Midland Corp. Price, Consensus and EPS Surprise
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Performance Across Business Lines
Despite the overall increase in total revenues, product sales declined 15% year over year to $9.1 million from $10.8 million. This dip reflected a strategic pivot away from lower-margin product sales toward more profitable service offerings. Within product sales, soundwall revenues increased 27% to $3.8 million due to enhanced production at all three of the company’s manufacturing facilities.
Easi-Set and Easi-Span building sales nearly doubled to $2.1 million, reflecting growing demand for modular precast buildings. However, this strength was offset by a 25% decline in barrier sales to $1.3 million and a 40% drop in utility sales to $1 million. Miscellaneous wall and product sales also fell sharply, driven by the absence of large-scale production contracts seen in the prior year.
Service revenues more than doubled to $13.6 million from $6 million. This growth was largely attributable to the special barrier rental project, which contributed $8.4 million to revenues, up from just $893,000 a year ago. Shipping and installation revenues moved down slightly to $4.3 million from $4.5 million in the prior-year period due to a slowdown in activity related to architectural and SlenderWall products. Royalty income rose 55% to $890,000, supported by increased production volumes from the company’s licensees.
Management Commentary & Strategic Direction
Chairman and chief executive officer, Ashley Smith, described the quarter as a strong start to 2025, noting that it was the company’s fourth consecutive quarter with revenues above $20 million. He credited the performance to rising infrastructure demand and the company’s ongoing investment in higher-margin business lines, particularly barrier rentals.
Smith also pointed to sustained momentum in the soundwall segment and renewed focus on marketing proprietary products like SlenderWall and Easi-Set buildings. He expressed confidence in Smith-Midland’s ability to meet customer demand across multiple sectors and deliver long-term shareholder value.
Management also highlighted the role of infrastructure spending at the federal, state, and local levels in supporting business momentum. Smith-Midland’s products continue to benefit from funding linked to national infrastructure initiatives and the company remains active in bidding on new projects. Sales and marketing initiatives have been identified as primary contributors to the anticipated growth in the SlenderWall and other building-related segments.
Factors Behind Performance Gains
The significant improvement in profitability was largely the result of the one-time barrier rental project, which carried a higher gross margin relative to product sales. This shift in revenue mix helped bring down the cost of sales as a percentage of revenues, excluding royalties, to 72% from 79% in the prior-year quarter.
General and administrative expenses rose slightly to $1.6 million, led by inflation across various cost categories, while selling expenses increased to $1 million due to the addition of sales personnel and higher commission payouts. The company expects selling expenses to rise in the coming quarters as it expands its sales force and marketing efforts.
From a financial perspective, Smith-Midland ended the quarter with $9 million in cash, up from $7.5 million at the end of 2024. Total debt stood at $4.9 million. The company maintained a modest level of capital expenditure at $595,000, reflecting investment in barrier production capacity. The balance sheet remains healthy, and the company continues to fund operations and growth initiatives through internally generated cash.
Guidance & Business Outlook
Smith-Midland anticipates 2025 revenues to be consistent with the 2024 reported level. Encouragingly, several SlenderWall projects are slated to commence production in the second half of the year, potentially boosting sales in subsequent quarters. Preliminary expectations for the second quarter of 2025 suggest that revenues and net income will exceed the year-ago reported levels, although the company emphasized that these results are not yet final.
Backlog as of May 2025 stood at approximately $52 million compared with $64.6 million a year earlier. The company expects its backlog to recover over the year, supported by continued marketing campaigns and expanded production capacity at its Virginia, North Carolina and South Carolina facilities. Although infrastructure spending trends remain favorable, management acknowledged ongoing inflationary pressures and labor constraints as potential headwinds.
Other Developments
The company remained active in investing for growth, particularly in its manufacturing footprint and rental fleet expansion. The capital budget for 2025 is expected to total $5 million, targeting equipment upgrades and facility expansions, with an eye toward improving long-term operating efficiency.
Smith-Midland delivered a robust quarter marked by strong top-line growth and enhanced profitability, thanks to the successful execution of a high-margin rental project and steady performance in core infrastructure segments. While product sales softness persisted in some areas, the company’s strategic shift toward service revenues and continued emphasis on proprietary offerings position it well for the remainder of the year.
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This article originally published on Zacks Investment Research (zacks.com).