Reliance Steel & Aluminum Co.
's
(
RS
) first-quarter 2012 earnings of $1.54 a share beat the Zacks
Consensus Estimate of $1.50 and surpassed the year-ago earnings of
$1.23. Profit (attributable to the company) shot up 26% year over
year to $116.2 million on the heels of a healthy double-digit
growth in the top line.
Revenue
Revenues cruised 20% year over year to $2,288.3 million, also
exceeding the Zacks Consensus Estimate of $2,139 million. The
company noted that its results were boosted by strength across a
host of industries including energy, aerospace, farm and heavy
equipment, and semiconductor. It saw higher sales volume and prices
in the quarter, which supported revenue growth.
With respect to volumes, tons sold jumped 13.8% year over year
and 11.2% sequentially in the quarter. Average prices per ton sold
went up 5.3% year over year and 1.3% sequentially. Carbon steel,
aluminum, stainless steel, alloy, toll processing and other
sales represented 52%, 15%, 15%, 12%, 2% and 4% of total revenues,
respectively.
Financial Position
Reliance Steel exited the quarter with cash and cash equivalents
of $70 million, down 9% year over year. Net debt-to-total capital
ratio was 29% as of March 31, 2012, compared with 25.7% as of March
31, 2011. The company has adequate liquidity to expand its existing
operations organically and through acquisitions.
Outlook and Recommendation
Looking ahead, Reliance Steel believes that demand will continue
to improve steadily except for the energy and aerospace industries,
where it anticipates higher growth. Further, the company noted that
the pricing environment still remains uncertain for certain metals
it sells. Based on these expectations, Reliance Steel forecast
earnings per share in the range of $1.40 to $1.50 for
second-quarter 2012. The current corresponding Zacks Consensus
Estimate is $1.52.
Reliance Steel has tremendous earnings capacity with its broad
and diversified product base, along with 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.
(
WOR
), 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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