A month has gone by since the last earnings report for Reliance Steel (RS Quick QuoteRS - Free Report) . Shares have added about 6.5% in that time frame, outperforming the S&P 500.

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

Reliance Steel's Q1 Earnings Beat, Sales Lag Estimates

Reliance Steel posted profits of $61.7 million or 92 cents per share in the first quarter of 2020, down from $190.1 million or $2.80 in the year-ago quarter.

Barring one-time items, adjusted earnings per share (EPS) came in at $2.45 that beat the Zacks Consensus Estimate of $2.10.

Reliance Steel recorded net sales of $2,572.9 million, down around 13% year over year. The figure missed the Zacks Consensus Estimate of $2,653 million. 

Volumes and Pricing

Shipments rose 6.8% sequentially owing to a relatively healthy demand environment. Moreover, demand in non-residential construction was solid during the first quarter with ongoing strength in shipment volumes of tubing and carbon steel structural products.

Average prices per ton sold in the first quarter fell 11% year over year to $1,742. Prices also declined 1.2% on a sequential-comparison basis.

Financials

Reliance Steel ended the first quarter with cash and cash equivalents of $172.1 million, up 28.4% year over year. Long-term debt was $1,772.3 million, down 21.5% year over year.

The company generated cash flow from operations of $170.8 million, up 45.7% year over year.

The company repurchased $300 million of its common stock or 3.3 million shares in the first quarter. As of Mar 31, it had around 3.1 million shares available for repurchase under the stock repurchase program. The company’s board declared a quarterly cash dividend of 62.5 cents per share on Apr 21, which is payable on Jun 12 to stockholders of record as of May 29.

Outlook

Reliance Steel did not provide any projections for the second quarter due to macroeconomic uncertainty stemming from the coronavirus pandemic. Per the company, future demand trends, metal pricing and conditions in the end markets that it serves could not be predicted at present.

However, the company believes that demand trends may recover once construction activities increase after coronavirus-related restrictions are lifted. The sudden closure of many automotive OEMs as well as steel and aluminum mills in mid-March has considerably reduced demand. This resulted in cutting production at the company’s toll processing operations in the United States and Mexico. Further, the duration of closures is uncertain at present. Notably, Reliance Steel believes that it is well positioned to support higher production levels when the automotive market recovers.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -62.56% due to these changes.

VGM Scores

Currently, Reliance Steel has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Reliance Steel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.