On Feb 26, we issued an updated research report on
Reliance Steel & Aluminum Co.
). While the company is well placed to leverage the strong
momentum across a number of end-use markets, it remains exposed
to a weak pricing environment and a still soft non-residential
CIRCOR INTL (CIR): Free Stock Analysis Report
NORSK HYDRO ADR (NHYDY): Get Free Report
RELIANCE STEEL (RS): Free Stock Analysis
WORTHINGTON IND (WOR): Free Stock Analysis
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The metal processor posted lower-than-expected fourth-quarter
2013 results, on Feb 20, with both revenues and adjusted earnings
missing Zacks Consensus Estimates. Profit fell by double-digits
on lower pricing and higher costs. The company, however, expects
demand environment to improve in first-quarter 2014.
Reliance Steel, a Zacks Rank #3 (Hold) stock, has tremendous
earnings capacity with its broad and diversified product base,
along with a wide geographic footprint that positions it well in
the industry. The company continues to evaluate and execute
additional growth projects and is poised to gain from strong
momentum across a number of markets, including automotive and
Reliance Steel continues its aggressive acquisition strategy to
boost growth. The acquisition of steel and aluminum components
maker Metals USA is a strategic fit with the company's portfolio
and complements its existing customer base, product mix and
geographic footprint. The company is also focused on growing its
Reliance Steel also remains committed to offer incremental
returns to its shareholders. The company recently raised
quarterly dividend by 6% to 35 cents per share. It increased its
quarterly dividend twice in 2013 and made dividend payments of
roughly $97 million during the year, up 61% year over year.
However, Reliance Steel remains challenged by weak steel industry
fundamentals. The U.S. steel industry has been hit by increased
imports of cheaper steel products. The industry remains affected
by overcapacity that continues to outpace demand.
Moreover, Reliance Steel still contends with a soft steel and
metals pricing environment. Average selling prices fell 10% year
over year in 2013. The overall pricing environment is expected to
In addition, the non-residential construction market - Reliance
Steel's largest end market - continues to be the weakest link.
While there have been some recovery of late, demand remains
significantly below the peak levels achieved in 2006.
Key Picks from the Sector
Other metals companies having favorable Zacks Rank are
CIRCOR International, Inc.
Norsk Hydro ASA
Worthington Industries, Inc.
). All of them hold a Zacks Rank #2 (Buy).