Reliance Closes Vonore Plant Buy - Analyst Blog

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Reliance Steel & Aluminum Co. ( RS ) has wrapped up the acquisition of all the assets for the Worthington Steel Vonore plant, a processing facility that was bought by Worthington Industries Inc. ( WOR ) in early 2011.

The Vonore plant will operate as a unit of Reliance Steel's wholly-owned subsidiary, Precision Strip Inc. The terms of the deal were not disclosed.

The Vonore plant will process and deliver metals, including carbon steel, aluminum and stainless steel on a toll basis for a fee without any ownership of the metal. The acquisition, which complements Reliance Steel's existing portfolio, will expand its presence in the Southeastern regions of the U.S.

Reliance Steel recently reported solid first-quarter 2012 results with both revenues and earnings outperforming Zacks Consensus Estimates. Its profits jumped 26% year over year on healthy growth in sales.

Revenues shot up 20%, boosted by strong demand across a string of industries, including energy, aerospace, farm and heavy equipment, and semiconductor. The company witnessed higher sales volume and prices in the quarter, which supported growth.

Reliance Steel believes that demand will continue to improve steadily except for the energy and aerospace industries, where it anticipates higher growth. Moreover, the company expects the pricing environment to remain uncertain for some metals it sells.

Reliance Steel 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, given the prevailing economic conditions.

However, the non-residential construction market, which is the company's largest end-market, continues to be the weakest link. In addition, raw material prices are expected to remain volatile.

We currently have a Neutral recommendation on Reliance Steel. The company, which competes with Metals USA Holdings Corp. ( MUSA ) and Worthington Industries Inc, retains a Zacks #2 Rank, which translates into a short-term (1 to 3 months) "Buy" rating.


 
METALS USA HLDG ( MUSA ): Free Stock Analysis Report
 
RELIANCE STEEL ( RS ): Free Stock Analysis Report
 
WORTHINGTON IND ( WOR ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: MUSA , RS , WOR

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