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Reliance Steel (RS) Touches New 52-Week High of $76.41
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Shares of Reliance Steel (RS - Free Report) scaled a new 52-week high of $76.41 on Jun 6 before retracing to end the day at $75.78.
What Drives Reliance Steel?
Reliance Steel’s adjusted earnings for first-quarter 2016 outperformed the Zacks Consensus Estimate. The company benefited from improved operational performance and strong customer demand across most of its end markets.
Reliance Steel, in its first-quarter call, said that it expects overall sales volumes to remain flat or increase up to 2% sequentially in the second quarter due to the slow growth of the U.S. economy. The company also expects average selling price to be up 3%−5% sequentially in the second quarter.
Reliance Steel’s broad and diversified product base, along with a wide geographic footprint positions it well in the industry. The company is favorably placed to leverage the strong momentum across a number of end markets.
Reliance Steel continues with its aggressive acquisition strategy to fuel growth. Recently, it closed the acquisition of Best Manufacturing, a custom sheet metal fabricator of steel and aluminum products. The acquisition is a strategic fit for Reliance Steel and highly complements its existing service center network, given Best Manufacturing’s specialty high margin products, value-added processing capabilities and strong focus on customer service.
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. Further, the buyout of Tubular Steel has enhanced the company’s long-term growth strategy and strength by expanding its product portfolio and end market diversification. Also, the acquisition of steel and aluminum components maker, Metals USA, complements Reliance Steel’s existing customer base, product mix and geographic footprint.
Additionally, Reliance Steel is seeing strong demand for its products across the aerospace and automotive markets. Demand in the aerospace market is being backed by higher commercial aerospace build rates. The automotive market is witnessing robust demand, 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. The non-residential demand is below peak levels but improving gradually.
However, the company saw declining demand across the energy sector due to low global prices. Demand for heavy industry remains consistent at low levels, but is expected to improve after the bill that was passed in Dec 2015.
Reliance Steel remains committed to offer incremental returns to its shareholders. It declared a cash dividend of 40 cents a share at the end of the first quarter and has 8.4 million shares remaining under its share repurchase program.
Nonetheless, Reliance Steel remains challenged by weak steel industry fundamentals and soft steel and metals pricing. Lower prices of metals have been hurting its revenues as witnessed in the first quarter. Weak oil pricing is also weighing on the company’s business.
Reliance Steel is a Zacks Rank #3 (Hold) stock. Stocks to Consider
Better-ranked companies in the basic materials space include AK Kaiser Aluminum Corporation (KALU - Free Report) , SKF AB (SKFRY - Free Report) and Norsk Hydro ASA (NHYDY - Free Report) , all holding 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 >>
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Reliance Steel (RS) Touches New 52-Week High of $76.41
Shares of Reliance Steel (RS - Free Report) scaled a new 52-week high of $76.41 on Jun 6 before retracing to end the day at $75.78.
What Drives Reliance Steel?
Reliance Steel’s adjusted earnings for first-quarter 2016 outperformed the Zacks Consensus Estimate. The company benefited from improved operational performance and strong customer demand across most of its end markets.
Reliance Steel, in its first-quarter call, said that it expects overall sales volumes to remain flat or increase up to 2% sequentially in the second quarter due to the slow growth of the U.S. economy. The company also expects average selling price to be up 3%−5% sequentially in the second quarter.
Reliance Steel’s broad and diversified product base, along with a wide geographic footprint positions it well in the industry. The company is favorably placed to leverage the strong momentum across a number of end markets.
Reliance Steel continues with its aggressive acquisition strategy to fuel growth. Recently, it closed the acquisition of Best Manufacturing, a custom sheet metal fabricator of steel and aluminum products. The acquisition is a strategic fit for Reliance Steel and highly complements its existing service center network, given Best Manufacturing’s specialty high margin products, value-added processing capabilities and strong focus on customer service.
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. Further, the buyout of Tubular Steel has enhanced the company’s long-term growth strategy and strength by expanding its product portfolio and end market diversification. Also, the acquisition of steel and aluminum components maker, Metals USA, complements Reliance Steel’s existing customer base, product mix and geographic footprint.
Additionally, Reliance Steel is seeing strong demand for its products across the aerospace and automotive markets. Demand in the aerospace market is being backed by higher commercial aerospace build rates. The automotive market is witnessing robust demand, 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. The non-residential demand is below peak levels but improving gradually.
However, the company saw declining demand across the energy sector due to low global prices. Demand for heavy industry remains consistent at low levels, but is expected to improve after the bill that was passed in Dec 2015.
Reliance Steel remains committed to offer incremental returns to its shareholders. It declared a cash dividend of 40 cents a share at the end of the first quarter and has 8.4 million shares remaining under its share repurchase program.
Nonetheless, Reliance Steel remains challenged by weak steel industry fundamentals and soft steel and metals pricing. Lower prices of metals have been hurting its revenues as witnessed in the first quarter. Weak oil pricing is also weighing on the company’s business.
Reliance Steel is a Zacks Rank #3 (Hold) stock.
Stocks to Consider
Better-ranked companies in the basic materials space include AK Kaiser Aluminum Corporation (KALU - Free Report) , SKF AB (SKFRY - Free Report) and Norsk Hydro ASA (NHYDY - Free Report) , all holding 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 >>