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Reliance Steel's (RS) Shares Up 14% in 3 Months: Here's Why

Zacks Equity Research

Shares of Reliance Steel & Aluminum Co. RS have popped around 14% over the past three months. The company has also trounced its industry’s rise of roughly 2% over the same time frame.

Reliance Steel, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $6.4 billion and average volume of shares traded in the last three months was around 510.2K. The company has an expected long-term earnings per share growth rate of 9%, above the industry average of 8.4%.


Let’s take a look at the factors that are driving this metals service center company.

What’s Working in RS’ Favor?

Better-than-expected earnings performance in the second quarter and upbeat prospects have contributed to the gain in Reliance Steel’s shares. The company’s adjusted earnings of $2.71 per share for the second quarter outpaced the Zacks Consensus Estimate of $2.60, translating into a roughly 4.2% positive surprise.

Reliance Steel is gaining from continued demand strength across aerospace and automotive end-markets, contributions of strategic acquisitions and its focus on high-margin products. The company is optimistic about business conditions for the third quarter. It expects steady end-market demand in the quarter.

Reliance Steel is seeing demand strength for its heat-treated aluminum products in the aerospace market. It remains committed to boost its market share in aerospace.

Moreover, strong demand is witnessed in the automotive market, backed by increased use of aluminum in the industry. The company is seeing healthy demand for its processing services in this market. It remains committed to invest in facilities and value-added processing equipment to address the rising demand for the services it offers.

Reliance Steel also continues with its aggressive acquisition strategy to tap growth opportunities. In particular, the buyout of All Metals Holding complements Reliance Steel’s growth strategy and meets its criteria of buying high quality businesses that are immediately accretive to its earnings. All Metals’ focus on high return, toll processing and logistics services further bolsters Reliance Steel’s solid position in these areas.

Reliance Steel & Aluminum Co. Price and Consensus


Reliance Steel & Aluminum Co. Price and Consensus

Reliance Steel & Aluminum Co. price-consensus-chart | Reliance Steel & Aluminum Co. Quote

Stocks to Consider

Stocks worth a look in the basic materials space include Kinross Gold Corporation KGC, Arconic Inc. ARNC and NewMarket Corporation NEU, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has projected earnings growth rate of 150% for the current year. The company’s shares have surged around 88% in a year’s time.

Arconic has an estimated earnings growth rate of 50% for the current year. Its shares have gained roughly 19% in the past year.

NewMarket has an expected earnings growth rate of 16.2% for the current year. Its shares have gained around 22% in the past year.

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