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Reliance Steel (RS) Gains on Strong Demand, Acquisitions

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Reliance Steel & Aluminum Co. (RS - Free Report) is benefiting from strong demand across key end-use markets, a diversified product base and strategic acquisitions.

Shares of Reliance Steel have gained 10.8% in the past year compared with 9.6% gain of the industry.

 

Zacks Investment Research
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Reliance Steel, a Zacks Rank #2 (Buy) stock, is optimistic about the business environment in 2022 and sees robust underlying demand in the majority of its end markets. Demand in non-residential construction, the company’s biggest market, improved in the first quarter of 2022 after being affected by typical year-end seasonality in the fourth quarter. The company expects non-residential construction activities to strengthen through 2022, aided by strong booking trends.

Reliance Steel is also witnessing strength in semiconductors and continued recovery in the energy (oil and natural gas) market. Demand in the heavy industry for both agricultural and construction equipment also continued to improve in the first quarter.

The company is also seeing healthy demand for the toll processing services that it provides to the automotive market despite the impact of global microchip shortages on production levels. Additionally, demand in commercial aerospace is improving on higher activities.

The company has also been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. Its latest acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals are in sync with its strategy of investing in high-quality businesses.

Rotax Metals diversifies the company's products by widening its portfolio of specialty bronze, brass and copper products. Massachusetts-based Admiral Metals’ strong reputation in the metal industry with high levels of customer service and next-day delivery flexibility promises to further solidify Reliance Steel’s position.

Nu-Tech’s reputation in the key markets that it serves through its proprietary processes and quality certifications and its support for Reliance Steel’s customer, product and geographical diversification strategies make it a solid choice. RS anticipates the acquisition to aid its growth in the nuclear, aerospace and other industries.

Higher metals prices are also driving the company’s performance and will likely continue to support the top line and margins. Average prices per ton sold in the first quarter went up roughly 58% year over year to $3,186. The company anticipates its average selling price per ton sold to be flat to up 2% sequentially in the second quarter of 2022 driven by its diverse product mix and strength in demand and pricing.

 

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Nutrien Ltd. (NTR - Free Report) , Albemarle Corporation (ALB - Free Report) and Cabot Corporation (CBT - Free Report) .

Nutrien, sporting a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 174.6% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 22.9% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 5.8%, on average. NTR has rallied roughly 39% in a year.

Albemarle has a projected earnings growth rate of 231.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 116.1% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22.5%. ALB has rallied roughly 31% in a year. The company flaunts a Zacks Rank #1.

Cabot, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 6% upward in the past 60 days.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 7% over a year.

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