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Reliance Steel to Gain From Improved Pricing, Acquisitions

Zacks
We issued an updated research report on Reliance Steel & Aluminum Co RS on Apr 9.
Reliance Steel is gaining from its broad and diversified product base, wide geographic footprint and continued demand strength across aerospace and automotive markets and synergies of acquisitions.
Reliance Steel’s shares has moved up 10.5% over the past six months, outperforming the 5% gain of the industry it belongs to.
The company, in its fourth-quarter call, said that it is seeing an improvement in overall customer sentiment and demand and expects the ongoing reduction in imports will support higher metal pricing. The company is optimistic about business activity levels in first-quarter 2018 and sees continued growth in the end markets in which it operates.
Reliance Steel continues with its aggressive acquisition strategy to tap growth opportunities. The addition of Metals USA to the company’s portfolio has complemented its existing customer base, product mix and geographic footprint.
The buyout of Tubular Steel also provided impetus to the company’s long-term growth strategy and strength by expanding its product portfolio and end-market diversification. Moreover, the acquisition of Best Manufacturing Inc. bodes well for the company's existing service center network with its specialty high margin products, value-added processing capabilities and strong focus on customer service. The acquisition of Ferguson Perforating Company also diversified its product portfolio.
Reliance Steel is also expected to benefit from an improving metal pricing environment. Higher pricing contributed to its earnings in the last reported quarter. The company sees its average selling prices to increase 4-6% on a sequential basis in first-quarter 2018. This should support its margins in the first quarter.
Reliance Steel & Aluminum Co. Price and Consensus

Zacks Rank & Stocks to Consider


Reliance Steel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space include Kronos Worldwide Inc. KRO, Methanex Corporation MEOH and LyondellBasell Industries N.V. LYB.
Kronos has an expected long-term earnings growth rate of 5% and sports a Zacks Rank #1 (Strong Buy). The company’s shares have moved up 33.8% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Methanex has an expected long-term earnings growth rate of 15% and flaunts a Zacks Rank #1. Its shares have gained 29.8% over a year.
LyondellBasell has an expected long-term earnings growth rate of 9% and carries a Zacks Rank #2 (Buy). Its shares have moved up 13% in a year.
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