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Reliance Steel (RS) Gains on Demand Strength, Acquisitions
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Reliance Steel & Aluminum Co. (RS - Free Report) is gaining from strong demand across key end-use markets, a diversified product base and strategic acquisitions.
Shares of Reliance Steel are up 25.3% in the past year compared with 6.7% gain of the industry.
Image Source: Zacks Investment Research
Reliance Steel, a Zacks Rank #3 (Hold) stock, is seeing robust underlying demand in the majority of its end markets. Demand in non-residential construction, the company’s biggest market, improved in the second quarter. The company is cautiously optimistic that demand for non-residential construction activity in the key areas in which it operates will remain steady into the third quarter.
The company is also witnessing strength in semiconductors and energy (oil and natural gas) markets. It is also seeing steady 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 recovered during the second quarter.
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.
However, Reliance Steel is exposed to challenges from cost inflation stemming from higher input and other costs. It is witnessing higher fuel, freight, packaging and labor costs. Its adjusted selling, general and administrative expenses went up around 11% year over year in the second quarter. The company is expected to continue to face headwinds from inflationary pressure in the third quarter of 2022.
Lower expected shipments and prices in the third quarter are also a concern. The company expects its shipment levels to be impacted, in the third quarter, by normal seasonal patterns including lower shipping volumes due to planned customer shutdowns and vacation schedules. Reliance Steel estimates its tons sold to be down 3-5% in the third quarter compared with the prior quarter. Average selling price per ton sold is also forecast to be down 5-7% sequentially in the third quarter led by lower pricing for many of its products, especially for carbon, stainless and aluminum flat-rolled products.
Better-ranked stocks worth considering in the basic materials space include Daqo New Energy Corp. (DQ - Free Report) , Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) and The Chemours Company (CC - Free Report) .
Daqo New Energy, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 177.5% for the current year. The Zacks Consensus Estimate for DQ's earnings for the current fiscal has been revised 20.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 10.8%. DQ has gained around 25% over a year.
Sociedad has a projected earnings growth rate of 513.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 32.6% upward in the past 60 days.
Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average being 28.2%. SQM has rallied roughly 96% in a year. The company carries a Zacks Rank #2 (Buy).
Chemours has a projected earnings growth rate of 40% for the current year. The Zacks Consensus Estimate for CC's current-year earnings has been revised 7.3% upward in the past 60 days.
Chemours’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 28.3%, on average. CC has gained around 7% in a year and currently carries a Zacks Rank #2.
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Reliance Steel (RS) Gains on Demand Strength, Acquisitions
Reliance Steel & Aluminum Co. (RS - Free Report) is gaining from strong demand across key end-use markets, a diversified product base and strategic acquisitions.
Shares of Reliance Steel are up 25.3% in the past year compared with 6.7% gain of the industry.
Image Source: Zacks Investment Research
Reliance Steel, a Zacks Rank #3 (Hold) stock, is seeing robust underlying demand in the majority of its end markets. Demand in non-residential construction, the company’s biggest market, improved in the second quarter. The company is cautiously optimistic that demand for non-residential construction activity in the key areas in which it operates will remain steady into the third quarter.
The company is also witnessing strength in semiconductors and energy (oil and natural gas) markets. It is also seeing steady 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 recovered during the second quarter.
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.
However, Reliance Steel is exposed to challenges from cost inflation stemming from higher input and other costs. It is witnessing higher fuel, freight, packaging and labor costs. Its adjusted selling, general and administrative expenses went up around 11% year over year in the second quarter. The company is expected to continue to face headwinds from inflationary pressure in the third quarter of 2022.
Lower expected shipments and prices in the third quarter are also a concern. The company expects its shipment levels to be impacted, in the third quarter, by normal seasonal patterns including lower shipping volumes due to planned customer shutdowns and vacation schedules. Reliance Steel estimates its tons sold to be down 3-5% in the third quarter compared with the prior quarter. Average selling price per ton sold is also forecast to be down 5-7% sequentially in the third quarter led by lower pricing for many of its products, especially for carbon, stainless and aluminum flat-rolled products.
Reliance Steel & Aluminum Co. Price and Consensus
Reliance Steel & Aluminum Co. price-consensus-chart | Reliance Steel & Aluminum Co. Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include Daqo New Energy Corp. (DQ - Free Report) , Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) and The Chemours Company (CC - Free Report) .
Daqo New Energy, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 177.5% for the current year. The Zacks Consensus Estimate for DQ's earnings for the current fiscal has been revised 20.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 10.8%. DQ has gained around 25% over a year.
Sociedad has a projected earnings growth rate of 513.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 32.6% upward in the past 60 days.
Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average being 28.2%. SQM has rallied roughly 96% in a year. The company carries a Zacks Rank #2 (Buy).
Chemours has a projected earnings growth rate of 40% for the current year. The Zacks Consensus Estimate for CC's current-year earnings has been revised 7.3% upward in the past 60 days.
Chemours’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 28.3%, on average. CC has gained around 7% in a year and currently carries a Zacks Rank #2.