Why Is Reliance Steel (RS) Down 5.7% Since the Last Earnings Report?
A month has gone by since the last earnings report for Reliance Steel & Aluminum Co. RS. Shares have lost about 5.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 catalysts.
Reliance Steel Tops Q4 Earnings & Sales Estimates
Reliance Steel posted a profit of $61.7 million or $0.84 per share in the fourth quarter of 2016, down around 10% from $68.6 million or $0.94 per share a year ago. Earnings per share, however, topped the Zacks Consensus Estimate of $0.75.
Revenues rose around 1.7% year over year to $2.06 billion in the reported quarter, beating the Zacks Consensus Estimate of $2.03 billion. The company continued to witness strength across automotive and aerospace markets in the quarter.
Overall sales volume declined 1.1% year over year in the quarter while average prices per ton went up 2.7% year over year.
FY16 Results
The company recorded a profit of $304.3 million or $4.16 per share for 2016, down 2.3% year over year.
Sales for the full year were $8.61 billion, down 7.9% year over year.
Financials
Reliance Steel ended the quarter with cash and cash equivalents of $122.8 million, up roughly 18% year over year. Long-term debt increased roughly 29% year over year to $1,846.7 million. Cash flow from operations for 2016 was $626.5 million. Net debt-to-capital ratio was 30.3% as of Dec 31, 2016, down from 31.8% as of Dec 31, 2015.
Reliance Steel did not repurchase any shares during 2016. It had 8.4 million shares available for buyback under its existing share repurchase program at the end of the year.
Outlook
Moving ahead, Reliance Steel is optimistic about business activity levels and metal pricing. The company anticipates tons sold to be up 8% to 10% on a sequential comparison basis in the first quarter of 2017, partly due to normal seasonal factors.
Moreover, Reliance Steel expects its average selling price to be up 2% to 4% in the first quarter from the fourth quarter of 2016. The company expects earnings to be in the range of $1.25 to $1.35 per share for the first quarter of 2017.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one upward revision for the current quarter compared to one downward.
Reliance Steel & Aluminum Co. Price and Consensus
Reliance Steel & Aluminum Co. Price and Consensus | Reliance Steel & Aluminum Co. Quote
VGM Scores
At this time, Reliance Steel's stock has a strong Growth Score of 'A', a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% 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.
Based on our scores, the stock is equally suitable for value, growth and momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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