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Reliance Steel (RS) Down 2.6% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Reliance Steel & Aluminum Co. (RS - Free Report) . Shares have lost about 2.6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Reliance Steel's Q3 Earnings, Revenues Top Estimates

Reliance Steel posted a profit of $97.3 million or $1.32 per share in the third quarter of 2017, a roughly 97% surge from $49.5 million or 68 cents per share a year ago.

Barring one-time items, earnings were $1.30 per share for the quarter that exceeded the Zacks Consensus Estimate of $1.20.

The company witnessed continued demand strength across automotive and aerospace markets along with higher year over year pricing levels in the quarter, which contributed positively to earnings. Demand in the third quarter was stronger than the company’s expectations.

Reliance Steel recorded net sales of $2,450.1 million in the reported quarter, up around 12% year over year, beating the Zacks Consensus Estimate of $2,366 million.

Overall sales volume rose 5.3% year over year while average prices per ton went up 6.8%.

Financials

Reliance Steel ended the quarter with cash and cash equivalents of $170.2 million, up roughly 19% year over year. Long-term debt increased roughly 13% year over year to $1,896 million. Cash flow from operations was $183.1 million for the third quarter.

Reliance Steel did not repurchase any shares during the third quarter. It had around 8.4 million shares available for buyback under its existing share repurchase program at the end of the quarter.

Outlook

Moving ahead, Reliance Steel remains optimistic regarding activity levels of business in the fourth quarter, which is subject to typical decline in shipping volumes resulting from fewer shipping days due to holiday-related customer closures.

Reliance Steel estimates tons sold will be down 4% to 6% in the fourth quarter on a sequential comparison basis. Average selling prices are projected to be flat to down 2% in the fourth quarter compared with the third quarter. Additionally, the company expects earnings per share to be in the band of 90 cents to $1.00 for the fourth quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

VGM Scores

At this time, Reliance Steel's stock has an average Growth Score of C, however its Momentum is doing a lot better with an A. Following the exact same course, the stock was allocated also a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall,the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value and momentum investors than growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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