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Why You Should Add Reliance Steel (RS) Stock to Your Portfolio

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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.

We are optimistic about its prospects and believe that the time is right to add the stock to the portfolio as it looks poised to carry the momentum ahead.

Let’s delve deeper into the factors that make this Zacks Rank #2 (Buy) stock an attractive choice for investors.

An Outperformer

Shares of Reliance Steel have gained 23.1% over a year against the 6.4% decline of its industry. It has also outperformed the S&P 500’s roughly 13% decline over the same period.

 

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Image Source: Zacks Investment Research

 

Estimates Northbound

Over the past two months, the Zacks Consensus Estimate for earnings for 2022 for Reliance Steel has increased 13.4%. The consensus estimate for 2023 earnings has also been revised 9% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Positive Earnings Surprise History

Reliance Steel’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 13.4%.

Upbeat Prospects

Reliance Steel is gaining from strong underlying demand in its major markets. It remains cautiously optimistic about the business environment in 2022 and sees robust demand in the majority of its end markets.

The company witnessed improved demand in non-residential construction, its largest market, in the second quarter of 2022. It 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.

Reliance Steel is also seeing strength in semiconductors and energy markets. Demand also remains steady for the toll processing services that it provides to the automotive market despite the impact of global microchip shortages on production levels. Demand also recovered in commercial aerospace 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.

 

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Albemarle Corporation (ALB - Free Report) , Univar Solutions Inc. and Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) .

Albemarle, currently sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 425.3% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 63.7% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 28% in a year.

Univar, currently carrying a Zacks Rank #2, has an expected earnings growth rate of 52.7% for the current year. The consensus estimate for UNVR's earnings for the current year has been revised 5.9% upward in the past 60 days.

Univar’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 27.6%. UNVR has gained around 3% over a year.

Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.

Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 85% in a year. The company currently carries a Zacks Rank #2.


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