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Reliance Steel (RS) Earnings Top, Sales Miss Estimates in Q1

Anindya Barman

Reliance Steel & Aluminum Co. RS posted profit of $190.1 million or $2.80 per share in the first quarter of 2019, up roughly 13% from $169 million or $2.30 in the year-ago quarter. Earnings per share also topped the Zacks Consensus Estimate of $2.38.

Reliance Steel recorded net sales of $2,956.6 million, up around 7% year over year. It, however, missed the Zacks Consensus Estimate of $2,977.1 million. The company witnessed a healthy demand environment and favorable metal pricing conditions during the quarter.

Reliance Steel & Aluminum Co. Price, Consensus and EPS Surprise

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 5.9% year over year to around 1.5 million tons in the reported quarter. Average prices per ton sold for the quarter rose around 14% year over year to $1,958.

Financials

Reliance Steel ended the quarter with cash and cash equivalents of $133.6 million, down roughly 8% year over year. Long-term debt was $2,122.2 million, up around 9% year over year. Cash flow from operations was $117.2 million for the first quarter.

The company did not repurchase any shares during the quarter. It had roughly 7 million shares available for repurchase under its share repurchase program as of Mar 31, 2019.

Outlook

Moving ahead, Reliance Steel is optimistic about business conditions for the second quarter of 2019. It expects steady demand and pricing in the quarter. The company also expects some pressure on gross margins on a sequential comparison basis in the second quarter.

Reliance Steel projects tons sold to be down 1% to up 2% sequentially in the second quarter. It also expects average selling price per ton for the second quarter to be flat to down 1% compared with first-quarter tally. The company expects adjusted earnings per share in the band of $2.60 to $2.70 for the second quarter.

Price Performance

Reliance Steel’s shares gained 28.9% year to date, outperforming the industry’s 13.4% rise.



Zacks Rank and Stocks to Consider

Reliance Steel currently carries a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks in the basic materials space include Sandstorm Gold Ltd. SAND, Flexible Solutions International Inc. FSI and W. R. Grace & Co. GRA.

Sandstorm Gold has an expected earnings growth rate of 200% for the current year and carries a Zacks Rank #1. The company’s shares have gained around 16% over the past year.  You can see the complete list of today’s Zacks #1 Rank stocks here .

Flexible Solutions has an expected earnings growth rate of 171.4% for the current year and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 101% in the past year.

W. R. Grace has an expected earnings growth rate of 10.4% for the current year and carries a Zacks Rank #2. Its shares have gained around 10% in the past year.

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