U.S. markets closed
  • S&P Futures

    3,755.75
    -33.75 (-0.89%)
     
  • Dow Futures

    30,517.00
    -264.00 (-0.86%)
     
  • Nasdaq Futures

    11,418.75
    -110.75 (-0.96%)
     
  • Russell 2000 Futures

    1,687.10
    -20.90 (-1.22%)
     
  • Crude Oil

    106.02
    +0.26 (+0.25%)
     
  • Gold

    1,804.00
    -3.30 (-0.18%)
     
  • Silver

    20.08
    -0.28 (-1.36%)
     
  • EUR/USD

    1.0465
    -0.0019 (-0.18%)
     
  • 10-Yr Bond

    2.9720
    -0.1210 (-3.91%)
     
  • Vix

    28.71
    +0.55 (+1.95%)
     
  • GBP/USD

    1.2131
    -0.0044 (-0.36%)
     
  • USD/JPY

    135.1400
    -0.5880 (-0.43%)
     
  • BTC-USD

    20,142.87
    +86.44 (+0.43%)
     
  • CMC Crypto 200

    431.01
    -0.45 (-0.11%)
     
  • FTSE 100

    7,169.28
    -143.04 (-1.96%)
     
  • Nikkei 225

    26,159.53
    -233.51 (-0.88%)
     

Reliance Steel (RS) Hits Fresh High: Is There Still Room to Run?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Have you been paying attention to shares of Reliance Steel (RS)? Shares have been on the move with the stock up 11.3% over the past month. The stock hit a new 52-week high of $198.44 in the previous session. Reliance Steel has gained 20% since the start of the year compared to the -5.9% move for the Zacks Industrial Products sector and the 25.2% return for the Zacks Metal Products - Distribution industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 17, 2022, Reliance Steel reported EPS of $6.83 versus consensus estimate of $5.17 while it beat the consensus revenue estimate by 2.95%.

For the current fiscal year, Reliance Steel is expected to post earnings of $16.96 per share on $13.39 billion in revenues. This represents a -23.33% change in EPS on a -4.99% change in revenues. For the next fiscal year, the company is expected to earn $12.78 per share on $12.18 billion in revenues. This represents a year-over-year change of -24.66% and -9.01%, respectively.

Valuation Metrics

Reliance Steel may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Reliance Steel has a Value Score of C. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 11.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 10.6X. On a trailing cash flow basis, the stock currently trades at 7.4X versus its peer group's average of 7.6X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Reliance Steel currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Reliance Steel meets the list of requirements. Thus, it seems as though Reliance Steel shares could still be poised for more gains ahead.

How Does RS Stack Up to the Competition?

Shares of RS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Alcoa (AA). AA has a Zacks Rank of # 1 (Strong Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of B.

Earnings were strong last quarter. Alcoa beat our consensus estimate by 22.55%, and for the current fiscal year, AA is expected to post earnings of $11.77 per share on revenue of $14.2 billion.

Shares of Alcoa have gained 16% over the past month, and currently trade at a forward P/E of 7.71X and a P/CF of 8.65X.

The Metal Products - Distribution industry is in the top 8% of all the industries we have in our universe, so it looks like there are some nice tailwinds for RS and AA, even beyond their own solid fundamental situation.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Reliance Steel & Aluminum Co. (RS) : Free Stock Analysis Report
 
Alcoa (AA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research