- 18 марта 2016, 19:10
- Zacks Investment Research
Shares of Reliance Steel RS clocked a new 52-week high of $70.25 on Mar 17, before pulling back a bit to end the day at $70.13.
Reliance Steel, which has a market cap of around $5 billion, has seen its shares shoot up roughly 22% so far this year and around 25% over a year. Average volume of shares traded over the last three months is around 623.6K. The company’s long-term projected EPS growth is 9%.
Factors to Consider
Reliance Steel’s adjusted earnings for fourth-quarter 2015 topped the Zacks Consensus Estimate. The company gained from improved operational performance and strong customer demand across most of its end markets. But lower sales volumes and reduced metal prices weighed on its sales in the quarter, which fell short of expectations.
Management expects overall sales volumes to increase by around 6-8% sequentially in the first quarter of 2016 owing to normal seasonal increase in shipping volumes and additional volume from Tubular Steel, Inc. Reliance Steel also believes that metal pricing for most of its products have stabilized at the present level and anticipates average selling price in the first quarter to be flat to up 1.5% sequentially.
Reliance Steel’s broad and diversified product base along with a wide geographic footprint position it well in the industry. The company continues its aggressive acquisition strategy to drive growth. The acquisition of steel and aluminum components maker Metals USA is a strategic fit for the company’s portfolio and complements its existing customer base, product mix and geographic footprint.
Moreover, the acquisition of Aluminium Services UK Limited has allowed Reliance Steel to expand its presence in the aerospace market. The purchase of Fox Metals and Alloys has also strengthened the company's foothold in the oil and gas space. The buyout of Tubular Steel also boosts the company’s long-term growth strategy and strength by expanding its product portfolio and end market diversification.
Reliance Steel is also seeing strong demand for its products across aerospace and automotive markets. Demand in the aerospace market is backed by higher commercial aerospace build rates. Strong demand is also witnessed in the automotive market, supported by the company’s toll processing businesses in the U.S. and Mexico as well as increased use of aluminum in the industry. Reliance Steel expects sustained momentum across these markets in 2016.
Reliance Steel also remains committed to offer incremental returns to its shareholders. It paid dividend worth $120.1 million in 2015 and bought back 6.2 million shares for $355.5 million during the year.
That said, Reliance Steel remains challenged by weak steel industry fundamentals and soft steel and metals pricing. Prices for carbon steel products are expected remain soft in the near term. High levels of imports are keeping prices for flat roll and plate under pressure.
Reliance Steel is a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked companies in the basic materials space include AK Steel Holding Corporation AKS, Usinas Siderurgicas de Minas Gerais S.A. USNZY and Norsk Hydro ASA NHYDY with all carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NORSK HYDRO ADR (NHYDY): Free Stock Analysis Report
RELIANCE STEEL (RS): Free Stock Analysis Report
AK STEEL HLDG (AKS): Free Stock Analysis Report
USIMINAS SA-ADR (USNZY): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research