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Reliance Steel (RS) Scales New 52-Week High at $72.60

Shares of Reliance Steel RS touched a new 52-week high of $72.60 yesterday before retracing to end the day at $72.48.

Reliance Steel, which has a market cap of roughly $5.2 billion, has delivered a year-to-date return of roughly 26%, higher than the S&P 500’s corresponding return of around 2.6%. Average volume of shares traded over the last three months is roughly 663.7K.

Factors to Consider

Reliance Steel’s adjusted earnings for fourth-quarter 2015 outstripped the Zacks Consensus Estimate. The company benefited from improved operational performance and strong customer demand across most of its end markets.

Reliance Steel, in its fourth-quarter call, said that it expects overall sales volumes to increase by around 6-8% sequentially in first-quarter 2016 on the back of normal seasonal increase in shipping volumes and additional volume from Tubular Steel, Inc.

Reliance Steel’s broad and diversified product base along with a wide geographic footprint position it well in the industry. The company is well placed to leverage the strong momentum across a number of end markets, including aerospace.

Reliance Steel continues its aggressive acquisition strategy to incite growth. The acquisition of steel and aluminum components maker Metals USA is a strategic fit for the company’s portfolio and complements its existing customer base, product mix and geographic footprint.

Moreover, the acquisition of Aluminium Services UK Limited has allowed Reliance Steel to expand its presence in the aerospace market. The purchase of Fox Metals and Alloys has also strengthened the company's foothold in the oil and gas space. The buyout of Tubular Steel also boosts the company’s long-term growth strategy and strength by expanding its product portfolio and end market diversification.

Reliance Steel is also seeing strong demand for its products across aerospace and automotive markets. Demand in the aerospace market is backed by higher commercial aerospace build rates. Strong demand is also witnessed in the automotive market, supported by the company’s toll processing businesses in the U.S. and Mexico as well as increased use of aluminum in the industry. Reliance Steel expects sustained momentum across these markets in 2016.

Moreover, Reliance Steel remains committed to offer incremental returns to its shareholders. It paid dividend worth $120.1 million in 2015 and bought back 6.2 million shares for $355.5 million during last year.

However, Reliance Steel remains challenged by weak steel industry fundamentals and soft steel and metals pricing. Lower prices of metals are hurting its revenues as witnessed in the fourth quarter.

Reliance Steel is a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked companies in the basic materials space include AK Steel Holding Corporation AKS, Companhia Siderurgica Nacional SID and Schnitzer Steel Industries, Inc. SCHN, all holding a Zacks Rank #2 (Buy).

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RELIANCE STEEL (RS): Free Stock Analysis Report
AK STEEL HLDG (AKS): Free Stock Analysis Report
CIA SIDERUR-ADR (SID): Free Stock Analysis Report
SCHNITZER STEEL (SCHN): Free Stock Analysis Report
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