Reliance Steel & Aluminum Co.
) fourth-quarter 2012 earnings per share of $1.06 trounced the
Zacks Consensus Estimate of 97 cents as well as the year-ago
earnings of 91 cents.. Profits shot up 18.4% year over year to
$80.4 million despite lower sales. The bottom line was boosted by
an inventory adjustment related credit of $37.1 million (included
in cost of sales).
For full-year 2012, earnings of $5.33 per share also topped the
Zacks Consensus Estimate of $5.26 and surpassed earnings of $4.58
per share posted in 2011. Profit jumped 17.4% year over year to
$403.5 million in 2012.
Revenues, Volume and Pricing
Revenues slipped 7.1% year over year to $1,889 million in the
reported quarter, missing the Zacks Consensus Estimate of $1,942
million. The results were impacted by economic uncertainty and
lower shipping days due to holiday season. A year over year
decline in average selling price also dented the top line.
Continued strength across energy, aerospace, farm and heavy
equipment, and automotive was partly marred by sustained weakness
in the non-residential construction market. The company saw solid
demand across the aerospace, energy and automotive markets in
Sales volume dipped 3.9% year over year and 8.3% sequentially in
the quarter. Average prices per ton were down 4.2% year over year
while remaining stable sequentially.
For the full year, sales rose 3.8% year over year to $8,442.3
million, yet shy of the Zacks Consensus Estimate of $8,496
The company exited 2012 with cash and cash equivalents of $97.6
million, up 15% year over year. Total debt was $1.21 billion at
the end of the year, down 9% from a year ago. Net debt-to-capital
ratio was 23.8% as of Dec 31, 2012, compared with 28.4% as of Dec
31, 2011. Operating cash flows jumped more than
two-and-a-half-fold year over year to $601.9 million in 2012.
Reliance Steel remains committed to boosting shareholder returns
leveraging its healthy liquidity position. The company has
boosted its quarterly dividend by 20% to 30 cents a share from
the earlier payout of 25 cents.
Reliance Steel continues its aggressive acquisition strategy to
incite growth. During the fourth quarter, it bought
privately-held Sunbelt Steel Texas, LLC. The acquisition will
allow Reliance Steel to serve customers across a number of oil
and gas well drilling categories. The company hopes to leverage
Sunbelt's growing presence in specialty markets.
Moreover, the company recently entered into an agreement to
acquire all outstanding shares of
Metals USA Holdings Corp.
). Metals USA is a strategic fit with Reliance Steel's portfolio
and complements its existing customer base, product mix and
Moving ahead, Reliance Steel expects the uncertain economic
environment to continue to affect the steel industry and hurt
demand and pricing in first-quarter 2013. The company, however,
witnessed modest rise in sales volume in Jan 2013 along with
stable pricing. It expects to earn $1.05 to $1.15 per share in
the first quarter.
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. It continues to
evaluate and execute additional growth projects and is well
placed to leverage the strong momentum across a number of end
However, we are concerned about the non-residential construction
market (the company's largest end market), which continues to be
the weakest link. Moreover, Reliance Steel remains exposed to
Reliance Steel currently retains a Zacks Rank #3 (Hold).
Other companies in the metals industry having a favorable Zacks
Worthington Industries Inc.
Gibraltar Industries Inc.
). Both the companies hold a Zacks Rank #2 (Buy).
METALS USA HLDG (MUSA): Free Stock Analysis
GIBRALTAR INDUS (ROCK): Free Stock Analysis
RELIANCE STEEL (RS): Free Stock Analysis
WORTHINGTON IND (WOR): Free Stock Analysis
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