We issued an updated research report on metals service center company, Reliance Steel & Aluminum Co (RS - Free Report) , on Dec 28.
Reliance Steel is gaining from its broad and diversified product base, wide geographic footprint and strong momentum across aerospace and automotive markets and favorable metal pricing. The company continues with its aggressive acquisition strategy to tap opportunities.
The company, during its third-quarter call, said that it is optimistic about business conditions for the fourth quarter and expects steady-to-slightly up pricing fundamentals based on current demand levels, ongoing trade actions and raw material costs. The company also sees healthy demand in the fourth quarter.
Demand in the aerospace market has been driven by higher commercial aerospace build rates and activities by defense customers. Strong demand is also witnessed in the automotive market, backed by increased use of aluminum in the industry.
Reliance Steel is also expected to continue to benefit from a favorable metal pricing environment. The company’s average selling prices increased 23% year over year in the third quarter, driving revenues and margins. Higher metal pricing contributed to earnings in the third quarter. Strong demand coupled with Section 232 trade actions on imported steel led to higher pricing in the third quarter.
Reliance Steel expects average selling price per ton to be flat-to-up 1% in the fourth quarter compared with the third-quarter tally.
Over the past three months, Reliance Steel’s stock has lost around 17.2% compared with the 26.6% decline of the industry it belongs to.
However, Reliance Steel’s shipments in fourth-quarter 2018 are expected to be affected by fewer shipping days and a decline in shipping volumes due to holiday-related shutdowns. The company expects tons sold to decline 5% to 7% in the fourth quarter on a sequential comparison basis.
Reliance Steel & Aluminum Co. Price and Consensus
Zacks Rank & Stocks to Consider
Reliance Steel currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the basic materials space are Verso Corporation (VRS - Free Report) , The Mosaic Company (MOS - Free Report) and Cameco Corporation (CCJ - Free Report) .
Verso has an expected earnings growth rate of 570% for the current year and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 25.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mosaic has an expected earnings growth rate of 75.2% for the current year and a Zacks Rank #2 (Buy). The company’s shares have gained 12.3% in the past year.
Cameco has an expected earnings growth rate of 66.7% for the current year and a Zacks Rank #2. Its shares have gained 20.8% in a year’s time.
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