Reliance Steel (RS) Buys Ontario-Based Nu-Tech Precision Metals

Reliance Steel & Aluminum Co. RS recently acquired Nu-Tech Precision Metals Inc. (“Nu-Tech”), a custom manufacturer of specialty extruded metals, fabricated parts and welded components. The terms of the deal were not disclosed.

Reliance Steel noted that Nu-Tech’s portfolio of value-adding specialty products is synchronous to its strategy of investing in high-quality and high-margin businesses. Nu-Tech’s reputation in the key markets that it serves through its proprietary processes and quality certifications, as well as its support to Reliance Steel’s customer, product and geographical diversification strategies make the company a good fit. Reliance is hopeful that the acquisition will aid its growth in the nuclear, aerospace and other industries.

Nu-Tech, located near Ottawa, Ontario, serves a wide variety of markets across North America, including the nuclear, aerospace and military markets, among others. It achieved annual net sales of around $44 million in 2020.

RS’ shares have gained 28.7% over the past year compared with the industry’s 41.4% rise. The company’s estimated earnings growth rate for the current year is pegged at 166%.

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On its third-quarterearnings call Reliance Steel remains optimistic about the business environment and expects robust or recovering demand in the majority of its end markets. However, factors such as bottlenecks in metal supply, labor shortages and supply-chain disruptions impacting shipments, as witnessed in the third quarter, are expected to persist in the fourth quarter as well. The company also expects demand to be sequentially affected by normal seasonal factors, including customer holiday-related shutdowns and fewer shipping days in the fourth quarter.

Reliance Steel estimates its tons sold to be down 5-8% in the fourth quarter from the prior quarter. Moreover, the metal prices at the beginning of the fourth quarter are higher than the average for the third quarter. Due to this upside, the company anticipates its average selling price per ton sold for the fourth quarter to go up in the range of 5-7%.

Considering the above-mentioned factors, the company expects adjusted earnings per share in a band of $5.05 to $5.15 for the fourth quarter.

Zacks Rank & Other Key Picks

Reliance Steel currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks from the industrial products space include Greif, Inc. GEF, sporting a Zacks Rank #1 (Strong Buy), and Donaldson Company, Inc. DCI and A. O. Smith Corporation AOS, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Greif has an expected earnings growth rate of 11.4% for the current year. The Zacks Consensus Estimate for the current year has been revised 5.6% upward over the past 60 days.

Greif beat the Zacks Consensus Estimate for earnings in all the four trailing quarters, with the surprise being 16.76%, on average. GEF’s shares have also risen 23.3% over a year.

Donaldson has an expected earnings growth rate of 15.5% for the current year. The Zacks Consensus Estimate for the current year has been revised 2% upward over the past 60 days.

Donaldson beat the Zacks Consensus Estimate for earnings in all the four trailing quarters, with the surprise being 6.67%, on average. DCI’s shares have risen 4% over a year.

A.O. Smith has an expected earnings growth rate of 35.2% for the current year. The Zacks Consensus Estimate for the current year has been revised 7% upward over the past 60 days.

A.O. Smith beat the Zacks Consensus Estimate for earnings in all the four trailing quarters, with the surprise being 16.82%, on average. Shares of AOS have rallied around 45.3% over a year.

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