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Reliance Steel's (RS) Q2 Earnings and Revenues Surpass Estimates

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Reliance Steel & Aluminum Co. (RS - Free Report) posted profits of $329.1 million or $5.08 per share in the second quarter of 2021, up from $80.2 million or $1.24 per share in the year-ago quarter.

Barring one-time items, adjusted earnings were $5.06 per share, up from $1.36 in the year-ago quarter. The figure topped the Zacks Consensus Estimate of $4.94 per share.

The company recorded net sales of $3,418.8 million, increasing around 69.3% year over year and topping the Zacks Consensus Estimate of $3,118.1 million. Improved demand in many of its end markets and favorable pricing environment for metals drove the sales to record levels in the second quarter.

Volumes and Pricing

Shipments increased 5.7% year over year and 1% sequentially in the second quarter. The rise is attributable to healthy demand.

Demand in non-residential construction, the company’s biggest market, improved during the reported quarter and is approaching pre-pandemic levels. Demand in this segment is expected to be healthy through the remainder of 2021 on the back of solid quoting activity, favorable customer sentiments and industry indicators. Reliance Steel also witnessed strength across semiconductors and modest improvement in the energy (oil and natural gas) market.

However, the company witnessed a slight drop in demand for the toll processing services that it provides to the automotive market as a result of the impact of global microchip shortages on production levels in certain automotive markets. Additionally, commercial aerospace experienced softened demand brought about by the pandemic-related shutdowns in Europe.

Average prices per ton sold in the second quarter went up 29.5% year over year to $2,418. Prices also rose 19.7% on a sequential comparison basis.

Financials

Reliance Steel ended the quarter with cash and cash equivalents of $727.6 million, a more than three-fold year-over-year increase. Long-term debt was $1,640.6 million, up around 15% year over year.

The company generated cash flow from operations of $101.6 million in the second quarter.

Outlook

Going forward, Reliance Steel remains optimistic about the business environment and sees robust demand in the majority of its end markets. However, factors such as bottlenecks in metal supply and supply-chain disruptions impacting shipments, prevalent in the second quarter, are expected to persist in the third quarter as well. Reliance Steel estimates its tons sold to be down 1% to up 1% in the third quarter compared with the prior quarter. Moreover, the metal prices at the beginning of the third quarter are higher than the average for the second quarter. Due to this upside, the company anticipates its average selling price per ton sold for the third quarter to go up in the range of 7-9%.

Taking into account the above-mentioned factors, the company expects adjusted earnings per share in a band of $5.55 to $5.75 for the third quarter.

Price Performance

Reliance Steel’s shares have soared 48.8% in a year compared with the industry’s 53.2% rise.

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Zacks Rank & Other Key Picks

Reliance Steel currently carries a Zacks Rank #1 (Strong Buy).

Other similar-ranked stocks in the industrial products space are Mitsui & Co. (MITSY - Free Report) , Greif, Inc. (GEF - Free Report) and AZZ Inc. (AZZ - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.

Mitsui has a projected earnings growth rate of roughly 328.6% for the current fiscal. The company’s shares have surged 50.2% over a year.

Greif has an expected earnings growth rate of around 35.7% for the current fiscal. The company’s shares have gained 56% over the past year.

AZZ has an expected earnings growth rate of 44.1% for the current fiscal. The company’s shares have jumped 61.7% over the past year.


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