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Reliance Steel & Aluminum Co. (NYSE:RS) shares fell 4.4% to US$111 in the week since its latest yearly results. The result was positive overall - although revenues of US$11b were in line with what analysts predicted, Reliance Steel & Aluminum surprised by delivering a statutory profit of US$10.34 per share, modestly greater than expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Reliance Steel & Aluminum after the latest results.
Taking into account the latest results, the current consensus, from the seven analysts covering Reliance Steel & Aluminum, is for revenues of US$10.5b in 2020, which would reflect a discernible 4.0% reduction in Reliance Steel & Aluminum's sales over the past 12 months. Statutory earnings per share are forecast to plunge 21% to US$8.27 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$10.7b and earnings per share (EPS) of US$8.65 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.
The consensus price target held steady at US$115, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Reliance Steel & Aluminum, with the most bullish analyst valuing it at US$125 and the most bearish at US$84.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Further, we can compare these estimates to past performance, and see how Reliance Steel & Aluminum forecasts compare to the wider market's forecast performance. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.0% a significant reduction from annual growth of 3.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 3.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Reliance Steel & Aluminum to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Reliance Steel & Aluminum. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Reliance Steel & Aluminum going out to 2024, and you can see them free on our platform here..
You can also view our analysis of Reliance Steel & Aluminum's balance sheet, and whether we think Reliance Steel & Aluminum is carrying too much debt, for free on our platform here.
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