Reliance Steel & Aluminum Co. (RS - Free Report) has been performing well of late. The company has a market capitalization of roughly $6.8 billion. The stock has moved up 23.9% in the past three months, outperforming the industry’s 18.4% rise. The company has an expected long-term earnings growth rate of 9%. With strong fundamentals and solid long-term growth opportunities, this stock can be considered a profitable bet now.
Strong Q1 Performance & Positive Outlook
Reliance Steel posted a profit of $169 million or $2.30 per share in the quarter, surging 51% from $111.7 million or $1.52 per share in the prior-year quarter. Earnings in the reported quarter beat the Zacks Consensus Estimate of $2.01.
The company benefited from positive demand environment and higher year over year pricing levels in the quarter, which contributed to its earnings. It witnessed continued strong demand across aerospace and automotive markets in the quarter.
Net sales also went up 14% year over year to $2,757.1 million, surpassing the Zacks Consensus Estimate of $2,704 million.
Notably, Reliance Steel has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in all of the trailing four quarters, delivering an average positive earnings surprise of 11.6%.
Reliance Steel is optimistic about business activity levels in second-quarter 2018 and sees continued improvement in the end markets in which it operates. However, it expects shipment levels to be affected by the pre-buying activity in the first quarter. The company expects earnings per share to be in the band of $2.60-$2.70 for the second quarter.
Estimates Moving Up
Estimates for the current quarter and for the current year have moved north over the past 30 days, reflecting analysts’ confidence on the stock.
Over this period, the Zacks Consensus Estimate for the current quarter has increased nearly 29% to $2.67 per share. Moreover, the Zacks Consensus Estimate for 2018 has also moved up 17.4% over the same timeframe to $8.45.
Aerospace and Automotive Demand to Boost Growth
Reliance Steel is gaining from its broad and diversified product base, synergies of acquisitions as well as continued strong momentum across automotive and aerospace markets. Demand in the aerospace market has been supported by higher commercial aerospace build rates. Strong demand is also witnessed in the automotive market, backed by the company’s toll processing businesses in the United States and Mexico as well as increased use of aluminum in the industry.
Improving Metal Pricing Environment
Reliance Steel is also benefiting from an improving metal pricing environment. Its average prices per ton sold went up around 10% year over year to $1,724 in the first quarter, contributing to its earnings. The company sees its average selling prices to be up 5% to 8% in the second quarter compared with the first. This should support its margins in the second quarter.
Zacks Rank & Other Stocks to Consider
Reliance Steel currently sports a Zacks Rank #1 (Strong Buy).
Other top-ranked stocks worth considering in the basic materials space include The Chemours Company (CC - Free Report) , Westlake Chemical Corporation (WLK - Free Report) and Huntsman Corporation (HUN - Free Report) , each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chemours has an expected long-term earnings growth rate of 15.5%. Its shares have gained 23.5% in a year.
Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied 94.4% in a year.
Huntsman has an expected long-term earnings growth rate of 8.3%. Its shares have moved up 30.1% in a year.
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