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Reliance Steel & Aluminum (RS) Up 1.1% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Reliance Steel & Aluminum Co. (RS - Free Report) . Shares have added about 1.1% in that time frame.

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

Reliance Steel Tops Earnings, Revenue Estimates in Q1

Reliance Steel saw its profits jump in the first quarter of 2018. It posted a profit of $169 million or $2.30 per share in the quarter, a roughly 51% surge from $111.7 million or $1.52 per share a year ago. Earnings per share for the reported quarter exceeded 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 saw continued strong demand across aerospace and automotive markets in the quarter.

Reliance Steel recorded net sales of $2,757.1 million, up 14% year over year. It surpassed the Zacks Consensus Estimate of $2,704 million.

Volumes and Pricing

Overall sales volume rose 3.6% year over year to record 1.6 million tons. Average prices per ton sold went up 10.3% from the prior-year quarter to $1,724.

Financials

Reliance Steel ended the quarter with cash and cash equivalents of $145.4 million, up roughly 9% year over year. Long-term debt was essentially flat year over year at $1,947.1 million. Cash flow from operations was $13.3 million for the first quarter.

Reliance Steel repurchased shares worth $50 million during the first quarter and had roughly 7.5 million shares available for repurchase under its share repurchase program at the end of the quarter. The company also paid $38.5 million in dividends in the first quarter.

Outlook

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 that took place in the first quarter.

Reliance Steel expects tons sold to be down 1% to up 1% in the second quarter of 2018 on a sequential comparison basis. Average selling prices are projected to be up 5% to 8% in the second quarter compared with the first. Additionally, the company expects earnings per share to be in the band of $2.60 to $2.70 for the second quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter.

VGM Scores

At this time, RS has a poor Growth Score of F. Its Momentum is doing a bit better with a D. The stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise RS has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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