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Reliance Steel (RS) Hits 52-Week High: What's Driving It?

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Reliance Steel & Aluminum Co. (RS - Free Report) reached a fresh 52-week high of $122.17 on Dec 20, before closing the session at $121.33.

The company has a market cap of around $8.1 billion. Average volume of shares traded in the past three months was around 519.6K. It has expected earnings per share growth rate of 7.4% for 2019. 

The stock has surged 74.7% in the past year compared with the industry’s 68.4% rally.

Factors Driving the Rally

Upbeat view and healthy growth prospects have been contributing to the company’s share price appreciation.

In October, the company mentioned that it is optimistic about business conditions in fourth-quarter 2019. Excluding the impact of normal seasonal patterns, Reliance Steel expects end-market demand to stay relatively steady in the fourth quarter compared with the third quarter.

The company is likely to benefit from acquisitions, diversified product base and wide geographic footprint. Last week, Reliance Steel inked a deal to purchase all of Santa Fe Springs, CA-based Fry Steel Company’s outstanding capital stock. The acquisition fits with its strategy of purchasing high-margin specialty product-focused business. This move also supports the company’s customer base and product diversification strategy.

Notably, Reliance Steel is witnessing strength in the aerospace and automotive markets. It is seeing strong demand for heat-treated aluminum products in aerospace market. Notably, demand in aerospace was healthy in the third quarter, with strong order backlog.

The company is also witnessing strong demand for processing services in the automotive market. Reliance Steel remains committed to invest in facilities and value-added processing equipment to address rising demand for its services. Strong demand in the non-residential construction end market provides additional upside.

Also, earnings estimate revisions have the greatest impact on stock prices. Earnings estimates for Reliance Steel for the fourth quarter and 2019 have moved up in the past two months. Over this period, the Zacks Consensus Estimate for fourth-quarter earnings has increased 1.8% to $1.70 and the same for 2019 has been revised 3.8% upward to $9.60. 

Zacks Rank & Other Key Picks

Reliance Steel currently sports a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks in the basic materials space include Kirkland Lake Gold Ltd. KL, Impala Platinum Holdings Limited IMPUY and Pan American Silver Corp. PAAS, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland Lake Gold has an expected earnings growth rate of 99.3% for 2019. The company’s shares have surged 59.5% in the past year.

Impala Platinum Holdings has projected earnings growth rate of 255.2% for fiscal 2020. The company’s shares have skyrocketed 325.8% over a year.

Pan American Silver has an estimated earnings growth rate of 56.4% for the current year. Its shares have returned 49.3% in the past year.

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