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Here's Why You Should Hold Onto Reliance (RS) Stock for Now
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Reliance, Inc. (RS - Free Report) is gaining from demand strength in its major end-use markets, a diversified product base and strategic acquisitions amid pricing headwinds.
Shares of Reliance, a Zacks Rank #3 (Hold) stock, have gained 27.8% in the past year compared with 1.8% rise of the industry.
Image Source: Zacks Investment Research
Strong Demand, Acquisitions Aid RS
Reliance is benefiting from strong underlying demand in its major markets. Non-residential construction, Reliance's primary market, saw a notable improvement in 2023, with optimism for continued growth in the first quarter of 2024. Commercial aerospace demand remained strong, supported by defense appropriations. Toll processing services for the automotive sector witnessed growth, with expectations for further improvement. Overall manufacturing demand improved modestly, driven by organic growth investments.
Although the semiconductor market declined due to inventory issues, stability was observed in the fourth quarter. Reliance remains optimistic about long-term prospects, buoyed by the CHIPS Act and investments in capacity expansion in the United States.
Reliance anticipates continued healthy demand trends in the first quarter of 2024 despite ongoing macroeconomic uncertainties and geopolitical issues.
Moreover, RS has been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. The acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals are in sync with its strategy of investing in high-quality businesses. The acquisition of Southern Steel Supply also expands the company’s reach in the Southern United States and boosts its value-added processing services. The buyout of Cooksey Iron & Metal Co also boosts Reliance's presence in the fast-growing Southeastern market. Moreover, the acquisition of American Alloy will expand Reliance's product portfolio with specialty carbon steel plates as well as new production capabilities.
Soft Pricing Ails
Reliance continued to face pricing pressure in the fourth quarter. Its average selling price per ton sold declined around 12% year over year in the quarter. Weaker pricing hurt its sales and the bottom line in the fourth quarter. The company also saw lower average selling price per ton across nearly all of its major commodity products in 2023. Prices fell roughly 16% year over year in 2023. Although Reliance is seeing stabilizing pricing trends for many of its products, weaker year-over-year prices are likely to weigh on its performance in the first quarter of 2024.
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Alpha Metallurgical Resources Inc. (AMR - Free Report) and Hawkins, Inc. (HWKN - Free Report) .
The Zacks Consensus Estimate for Carpenter Technology’s current fiscal year earnings is pegged at $4.00, indicating a year-over-year surge of 250.9%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 50% in the past year. CRS currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Alpha Metallurgical Resources’ current-year earnings has been revised upward by 49.2% in the past 60 days. AMR delivered a trailing four-quarter earnings surprise of roughly 24.8%, on average. Its shares are up around 124% in a year. AMR currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Hawkins’ current fiscal year earnings is pegged at $3.61 per share, indicating a year-over-year rise of 26.2%. The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised 4.3% upward in the past 30 days. HWKN, a Zacks Rank #2 stock, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 30.6%. The company’s shares have rallied roughly 75% in the past year.
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Here's Why You Should Hold Onto Reliance (RS) Stock for Now
Reliance, Inc. (RS - Free Report) is gaining from demand strength in its major end-use markets, a diversified product base and strategic acquisitions amid pricing headwinds.
Shares of Reliance, a Zacks Rank #3 (Hold) stock, have gained 27.8% in the past year compared with 1.8% rise of the industry.
Image Source: Zacks Investment Research
Strong Demand, Acquisitions Aid RS
Reliance is benefiting from strong underlying demand in its major markets. Non-residential construction, Reliance's primary market, saw a notable improvement in 2023, with optimism for continued growth in the first quarter of 2024. Commercial aerospace demand remained strong, supported by defense appropriations. Toll processing services for the automotive sector witnessed growth, with expectations for further improvement. Overall manufacturing demand improved modestly, driven by organic growth investments.
Although the semiconductor market declined due to inventory issues, stability was observed in the fourth quarter. Reliance remains optimistic about long-term prospects, buoyed by the CHIPS Act and investments in capacity expansion in the United States.
Reliance anticipates continued healthy demand trends in the first quarter of 2024 despite ongoing macroeconomic uncertainties and geopolitical issues.
Moreover, RS has been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. The acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals are in sync with its strategy of investing in high-quality businesses. The acquisition of Southern Steel Supply also expands the company’s reach in the Southern United States and boosts its value-added processing services. The buyout of Cooksey Iron & Metal Co also boosts Reliance's presence in the fast-growing Southeastern market. Moreover, the acquisition of American Alloy will expand Reliance's product portfolio with specialty carbon steel plates as well as new production capabilities.
Soft Pricing Ails
Reliance continued to face pricing pressure in the fourth quarter. Its average selling price per ton sold declined around 12% year over year in the quarter. Weaker pricing hurt its sales and the bottom line in the fourth quarter. The company also saw lower average selling price per ton across nearly all of its major commodity products in 2023. Prices fell roughly 16% year over year in 2023. Although Reliance is seeing stabilizing pricing trends for many of its products, weaker year-over-year prices are likely to weigh on its performance in the first quarter of 2024.
Reliance, Inc. Price and Consensus
Reliance, Inc. price-consensus-chart | Reliance, Inc. Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Alpha Metallurgical Resources Inc. (AMR - Free Report) and Hawkins, Inc. (HWKN - Free Report) .
The Zacks Consensus Estimate for Carpenter Technology’s current fiscal year earnings is pegged at $4.00, indicating a year-over-year surge of 250.9%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 50% in the past year. CRS currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Alpha Metallurgical Resources’ current-year earnings has been revised upward by 49.2% in the past 60 days. AMR delivered a trailing four-quarter earnings surprise of roughly 24.8%, on average. Its shares are up around 124% in a year. AMR currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Hawkins’ current fiscal year earnings is pegged at $3.61 per share, indicating a year-over-year rise of 26.2%. The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised 4.3% upward in the past 30 days. HWKN, a Zacks Rank #2 stock, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 30.6%. The company’s shares have rallied roughly 75% in the past year.