Shares of Reliance Steel & Aluminum Co. jumped Thursday after it reported a 72 percent increase in fourth-quarter net income. The metals processor and distributor also said it expects demand for its products to improve in 2012.
THE SPARK: The Los Angeles company said net income totaled $67.9 million, or 91 cents per share, in the October-to-December quarter. That compared with net income of $39.5 million, or 53 cents per share, in the year-ago quarter. Revenue increased 28 percent to $2.03 billion.
Analysts polled by FactSet were expecting lower earnings of 81 cents per share on revenue of $1.95 billion.
The company said demand from the oil and gas, agriculture and mining industries, among others, improved in 2011. For the year, net income grew 77 percent to $343.8 million, while revenue rose 29 percent to $8.13 billion.
Reliance expects prices to remain relatively strong through the first quarter and overall demand to show slow, steady improvement. It estimated earnings to range from $1.15 per share to $1.25 per share in the current quarter, which ends in March. Analysts were expecting higher earnings, however, of $1.26 per share.
THE ANALYSIS: J.P. Morgan analyst Michael Gambardella said Reliance is delivering strong earnings growth despite still-depressed levels in the non-residential construction industry, and recent acquisitions will benefit the company.
The analyst raised his target price on the shares to $63 from $62, and raised his earnings estimate for 2012 to $5.92 per share from $5.62 per share. Analysts, on average, were expecting $5.32 per share for the year.
THE STOCK: Shares of Reliance rose $3.38, or 6.4 percent, to close at $55.86.
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