Reliance Steel & Aluminum Co.
) second-quarter 2012 earnings per share of $1.44 beat the Zacks
Consensus Estimate of $1.41 and surpassed the year-ago level of
$1.31. Profits went up 10% to $108.8 million from $98.7 million a
year ago on the heels of healthy growth in its top line.
Revenues cruised 8% to $2.21 billion, but missed the Zacks
Consensus Estimate of $2.24 billion. The increase in revenues was
driven by strength across a host of industries including energy,
aerospace, farm and heavy equipment, and automobile.
Sales volume increased 10% but plunged 2% sequentially in the
quarter. Average prices per ton sold went down 2%, both year over
year and sequentially. Carbon steel, aluminum, stainless steel,
alloy, toll processing and other sales represented 52%, 15%,
15%, 11%, 2% and 5% of total revenue, respectively.
Cash and cash equivalents stood at $93.6 million as of June 30,
2012, compared with $84.6 million as of December 31, 2011. Net debt
stood at $1,425.4 million as of June 30, 2012 compared with
$1,234.4 million as of December 31, 2012.
Net debt-to-capital ratio was 29.9% as of June 30, 2012 compared
with 28.4% as of December 31, 2011. At the end of the quarter, the
company had adequate liquidity to expand its existing operations
organically and through acquisitions.
Reliance Steel boosted its quarterly dividend by 67% to 25 cents
a share from 15 cents a share. The dividend is payable on September
14, 2012 to shareholders of record as of August 17, 2012.
Reliance Steel expanded its presence in the energy market
through a number of acquisitions. The company acquired National
Specialty Alloys, LLC - a Houston, Texas-based processor and
distributor of premium stainless steel and nickel alloy bars and
shapes. The company's subsidiary Precision Strip Inc. also bought
the assets of the Vonore, Tennessee Worthington Steel plant, which
expanded its toll processing network into that area.
Reliance, through its newly-formed subsidiary Bralco Metals
(Australia) Pty Ltd, also acquired most of the assets of Airport
Metals (Australia) Pty Ltd, a subsidiary of Samuel Son & Co.
Limited. Based in Melbourne, Airport Metals (Australia) functions
as a stocking distributor of aircraft materials and supplies.
Outlook and Recommendation
Looking ahead, Reliance Steel expects the economic challenges to
prevail in the third quarter of the year but does not foresee any
major pricing changes. The company also expects that there will be
one less shipping day in the upcoming quarter. Based on these
assumptions, the company expects to earn $1.15 to $1.25 per share
for the third quarter.
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.
Reliance Steel competes with
Metals USA Holdings Corp.
). The company retains a Zacks #3 Rank, which translates into a
short-term (1 to 3 months) Hold rating.
METALS USA HLDG (MUSA): Free Stock Analysis
RELIANCE STEEL (RS): Free Stock Analysis Report
WORTHINGTON IND (WOR): Free Stock Analysis
To read this article on Zacks.com click here.