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What Makes Reliance Steel (RS) Stock a Solid Choice Right Now

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Reliance Steel & Aluminum Co. (RS - Free Report) is gaining from demand strength across its major 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.

Reliance Steel carries a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.

Let’s take a look into the factors that make Reliance Steel an attractive choice for investors right now.

An Outperformer

Shares of Reliance Steel have gained 30.6% over a year against the 1.7% decline of its industry. It has also outperformed the S&P 500’s roughly 14.2% decline over the same period.

 

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Image Source: Zacks Investment Research

 

Positive Earnings Surprise History

Reliance Steel’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 13.6%.

Superior Return on Equity (ROE)

Reliance Steel’s ROE of 29.3%, as compared with the industry average of 24.4%, manifests the company’s efficiency in utilizing shareholder’s funds.

Growth Drivers in Place

Reliance Steel is benefitting from strong underlying demand in its major markets. It expects healthy demand trends to continue into the fourth quarter notwithstanding the current macroeconomic uncertainty, inflation, ongoing supply-chain disruptions and geopolitical factors.

The company witnessed strength in the semiconductors market in the third quarter of 2022 and expects this trend to continue in the fourth quarter. The company also witnessed sequentially higher demand for the toll processing services that it provides to the automotive market due to increased production rates by certain automotive OEMs despite the impact of supply-chain challenges.

Additionally, demand in commercial aerospace recovered during the third quarter and the company is cautiously optimistic that demand will continue to improve in the fourth quarter. It also expects demand in the energy (oil and natural gas) market to modestly improve in the fourth 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 Olympic Steel, Inc. (ZEUS - Free Report) , Commercial Metals Company (CMC - Free Report) and Nucor Corporation (NUE - Free Report) .

Olympic Steel currently sports a Zacks Rank #1. The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 1.5% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Olympic Steel’s earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 25.4%, on average. ZEUS has rallied around 71% in a year.

Commercial Metals currently carries a Zacks Rank #1. The consensus estimate for CMC's current-year earnings has been revised 19.4% upward in the past 60 days.

Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 16.7%, on average. CMC has gained around 52% in a year.

Nucor currently carries a Zacks Rank #1. The company has a projected earnings growth rate of 21.5% for the current year.

Nucor’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 3.9%, on average.  NUE has rallied roughly 45% in a year.

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