Reliance Steel & Aluminum Co.'s RS stock looks promising at the moment. Its shares have popped around 20% over the past three months, partly due to better-than-expected results in the third quarter. The company is benefiting from continued demand strength across aerospace and automotive end-markets, focus on high-margin products and strategic acquisitions.
Reliance Steel currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let's see what makes this metals service center company an attractive investment option at the moment.
Reliance Steel has outperformed the industry it belongs to year to date. The company’s shares have shot up 64.7% compared with 25% rise recorded by the industry.
Estimates Going Up
Earnings estimate revisions have the greatest impact on stock prices. Estimates for 2019 for Reliance Steel have moved north over the past month. Over this period, the Zacks Consensus Estimate for the year has moved up 5.8%. The Zacks Consensus Estimate for 2020 has also increased 5% over the same timeframe.
Positive Earnings Surprise History
Reliance Steel has outpaced the Zacks Consensus Estimate in three of the trailing four quarters. In this timeframe, the company has delivered a positive average earnings surprise of 1.6%.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Reliance Steel is 12.5%, above the industry’s level of 2.7%.
Strong End-Market Demand
Reliance Steel is seeing strength in the aerospace and automotive markets. It is witnessing healthy demand for its heat-treated aluminum products in the aerospace market. Demand in aerospace was healthy in the third quarter with a strong order backlog. The company remains committed to boost its market share in aerospace.
Moreover, strong demand is witnessed in the automotive market, supported by increased use of aluminum in the industry. The company is seeing healthy demand for its processing services in this market and remains committed to invest in facilities and value-added processing equipment to address the rising demand for the services it offers.
Moreover, demand in the non-residential construction end-market was also stronger than what the company had anticipated in the third quarter. Strong demand in this market led to higher-than-expected shipments in the quarter.
The company, in its third-quarter call, noted that it 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.
Acquisitions to Drive Growth
Reliance Steel 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-consensus-chart | Reliance Steel & Aluminum Co. Quote
Other Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited AEM, Kirkland Lake Gold Ltd. KL and Franco-Nevada Corporation FNV, all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied roughly 63% in a year’s time.
Kirkland Lake Gold has projected earnings growth rate of 96.3% for the current year. The company’s shares have surged around 152% in a year’s time.
Franco-Nevada has estimated earnings growth rate of 46.2% for the current year. The company’s shares have shot up roughly 40% in a year’s time.
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