Reliance Steel (RS) Q3 Earnings and Sales Surpass Estimates
Reliance Steel & Aluminum Co. RS posted profit of $162.7 million or $2.40 per share in the third quarter of 2019, up from $148.3 million or $2.03 in the year-ago quarter.
Adjusted earnings per share (EPS) for the quarter were $2.39, which beat the Zacks Consensus Estimate of $1.97.
Reliance Steel recorded net sales of $2,685.9 million, down around 9.7% year over year. Nevertheless, the figure beat the Zacks Consensus Estimate of $2,668.4 million.
The company’s quarterly results benefited from its strategy of focusing on high levels of customer service across diverse products and end markets.
Reliance Steel & Aluminum Co. Price, Consensus and EPS Surprise
Reliance Steel & Aluminum Co. price-consensus-eps-surprise-chart | Reliance Steel & Aluminum Co. Quote
Volumes and Pricing
Overall sales volume went down around 1.8% year over year to roughly 1.48 million tons in the reported quarter. Volumes also declined 2% on a sequential-comparison basis.
Average prices per ton sold for the quarter fell 8.4% year over year to $1,807. Prices also declined around 5.1% on a sequential-comparison basis.
Financials
Reliance Steel ended the quarter with cash and cash equivalents of $166 million, up roughly 48.1% year over year. Long-term debt was $1,578.2 million, down around 20.3% year over year.
During the first nine months of 2019, cash flow from operations was $954.1 million compared with $233.3 million in the year-ago period.
The company did not repurchase any shares of its common stock during the third quarter. As of Sep 30, 2019, around 6.4 million shares remained available for repurchase under its stock repurchase program.
Outlook
The company is optimistic about business conditions in the fourth quarter. Excluding the impact of normal seasonal patterns, it expects end demand to stay relatively steady in the fourth quarter compared with the third quarter.
Reliance Steel projects total tons sold to be sequentially down 4% to 7% in the fourth quarter. Overall metals pricing is expected to remain near current levels, which is likely to result in its average selling price per ton sold to decline 2% to 3% sequentially.
On the basis of these expectations, the company currently projects adjusted EPS in the range of $1.60-$1.70 for the fourth quarter.
Price Performance
Reliance Steel’s shares have surged 44.7% in the past year against the industry’s 9.1% decline.
Zacks Rank & Key Picks
Reliance Steel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Franco-Nevada Corporation FNV and Kirkland Lake Gold Ltd. KL, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinross has an expected earnings growth rate of 210% for 2019. The company’s shares have surged 82.3% in the past year.
Franco-Nevada has a projected earnings growth rate of 39.3% for 2019. The company’s shares have rallied 54.9% in a year’s time.
Kirkland Lake Gold has an estimated earnings growth rate of 93.4% for the current year. Its shares have moved up 134.3% in the past year.
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