Reliance Steel & Aluminum Co. (RS - Free Report) saw its profits jump in the fourth quarter of 2017, buoyed by a sizable tax benefit. It posted a profit of $301.4 million or $4.09 per share in the quarter, a roughly five-fold surge from $61.7 million or 84 cents per share a year ago. The company recorded a one-time tax benefit of $207.3 million related to the U.S. Tax Cuts and Jobs Act in the reported quarter.
Barring one-time items, earnings were $1.22 per share for the quarter that exceeded the Zacks Consensus Estimate of $1.00.
The company benefited from strong overall demand and higher year over year pricing levels in the quarter, which also contributed to its earnings.
Reliance Steel recorded net sales of $2,376.4 million for the reported quarter, up around 15% year over year. It surpassed the Zacks Consensus Estimate of $2,307 million.
Overall sales volume rose 6.3% year over year while average prices per ton went up 8.8% from the prior-year quarter.
For 2017, profit was $613.4 million or $8.34 per share, doubling from $304.3 million or $4.16 per share logged a year ago. Adjusted earnings for the year were $5.44, up around 21% from $4.48 in 2016.
Net sales for the full year rose roughly 13% year over year to $9,721 million.
Reliance Steel ended 2017 with cash and cash equivalents of $154.4 million, up roughly 26% year over year. Long-term debt fell roughly 2% year over year to $1,809.4 million. Cash flow from operations was $200.7 million for the fourth quarter.
Reliance Steel repurchased shares worth $25 million during the fourth quarter and had roughly 8.1 million shares available for repurchase under its share repurchase program at the end of 2017.
Reliance Steel is seeing an improvement in overall customer sentiment and demand and expects that the ongoing reduction in imports will continue to support higher metal pricing moving ahead. The company is optimistic about business activity levels in first-quarter 2018 and sees continued growth in the end markets in which it operates.
Reliance Steel expects tons sold will be up 6% to 8% in the first quarter of 2018 on a sequential comparison basis. Average selling prices are projected to be up 4% to 6% in the first quarter compared with the fourth quarter. Additionally, the company expects earnings per share to be in the band of $1.90 to $2.00 for the first quarter.
Reliance Steel’s shares have moved up 23% in the last three months, outperforming the industry’s 14.4% gain.
Zacks Rank and Stocks to Consider
Reliance Steel currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the basic materials space include Olympic Steel, Inc. (ZEUS - Free Report) , Methanex Corporation (MEOH - Free Report) and The Mosaic Company (MOS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Olympic Steel has an expected long-term earnings growth rate of 7.5%. Its shares rallied around 40% over the past six months.
Methanex has an expected long-term earnings growth rate of 15%. Its shares have gained roughly 32% over the past six months.
Mosaic has an expected long-term earnings growth rate of 9.5%. Its shares have rallied 29% over the past six months.
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