Reliance Steel (RS) Tops Q1 Earnings & Sales; Profits Soar - Analyst Blog
Reliance Steel & Aluminum Co. RS recorded higher profit in the first quarter of 2015 backed by improved demand in non-residential construction markets and increased toll processing activity in the automotive market. Profit, as reported, jumped 16.2% year over year to $101.3 million in the quarter from $87.2 million a year ago.
The company registered earnings of $1.30 per share in the first quarter of 2015, up 17.1% from $1.11 in the same quarter of 2014. The results beat the Zacks Consensus Estimate of $1.03 per share by a wide margin. Earnings also exceeded the company’s expectations, aided by strong gross profit margins and effective expense control.
Reliance Steel & Aluminum Company - Earnings Surprise | FindTheCompany
Revenues, Volume and Pricing
Revenues rose 2.4% year over year to $2,614.4 million in the reported quarter, coming ahead of the Zacks Consensus Estimate of $2,596 million. Higher demand coupled with increased market share and improved sales volume supported the top line.
Overall, sales volumes were up 0.8% year over year in the first quarter while same-store sales volumes dipped 0.1%. Average prices per ton were up 0.9% year over year.
Financials
Reliance Steel ended the quarter with cash and cash equivalents of $101.6 million, down 10.6% year over year. Long-term debt increased roughly 2.1% year over year to around $2.27 billion. Net debt-to-capital ratio was 36.3% as of the end of the reported quarter, up from 33.8% a year ago.
In Feb 2015, Reliance Steel’s board raised its quarterly dividend by 2.8% to 40 cents per share. The company generated strong operating cash flows of $171.4 million in the reported quarter, up almost one and half fold year over year.
Reliance Steel repurchased 3.2 million shares of its common stock under its existing share repurchase plan for $185 million during the quarter. After the end of the first quarter, Reliance Steel repurchased an additional $15 million of its common stock in early April, for a total of $200 million year to date. The company is reported to have repurchased a total of $250 million of its common stock since Oct 2014.
Outlook
Going forward, Reliance Steel anticipates the U.S. economy to witness modest improvements throughout 2015. Though the company expects strong volumes to continue, sustained rise in imports owing to a strong U.S. dollar and weaker economies in other parts of the world will lead to a fall in metal prices.
Reliance anticipates a modest increase in tons sold in the second quarter of 2015 over the first quarter. However, falling prices of metals can pose a threat to average selling prices and margins. Assuming this, the company expects adjusted earnings for second-quarter 2015 to be in the band of $1.05–$1.15 per share.
Reliance Steel currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the basic materials sector include Gold Fields Ltd. GFI, Evraz Highveld Steel & Vanadium Ltd. HGVLY and LB Foster Co. FSTR. While Gold Fields sports a Zacks Rank #1 (Strong Buy), both Evraz Highveld Steel & Vanadium and LB Foster carry a Zacks Rank #2 (Buy).
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