Reliance Steel & Aluminum Co. RS recently completed the acquisition of Merfish United, a leading U.S. distributor of tubular building products, from One Equity Partners, a middle market private equity firm. The acquisition is effective Oct 1, 2021. The plans for the takeover were announced in August 2021. The financial and other terms of the transaction have not yet been disclosed.
Merfish United’s product portfolio includes full lines of steel pipe, copper tubing, plastic pipe, electrical conduit, and related products for the commercial, residential, municipal, and industrial building markets. For the 12 months ended Jun 30, 2021, Merfish United recorded net sales of roughly $500 million.
Reliance maintained that the buyout is in sync with its strategy of taking over companies that have an immediate accretion coupled with strong management teams. This has also enabled the company to focus on adjoining businesses beyond traditional metal service centers and has broadened its exposure to the copper and plastic products domain.
Reliance Steel’s shares have soared 28.3% over the past year compared with the industry’s 84.2% rise. The company’s estimated earnings growth rate for the current year is pegged at 147.7%.
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In the second quarter, the company recorded adjusted earnings of $5.06 per share, which increased from $1.36 in the year-ago quarter and beat the Zacks Consensus Estimate of $4.94. It raked in net sales of $3,418.8 million, which jumped 69.3% year over year and topped the Zacks Consensus Estimate of $3,118.1 million.
Reliance Steel remains optimistic about the business environment and sees robust demand in the majority of its end markets. However, factors such as bottlenecks in metal supply and supply-chain disruptions impacting shipments, which were prevalent in the second quarter, are expected to persist in the third quarter as well. Its estimates its tons sold to be down 1% to up 1% in the third quarter compared with the prior quarter. Moreover, the metal prices at the beginning of the third quarter are higher than the average in the second quarter. Due to this upside, the company anticipates its average selling price per ton sold for the third quarter to go up in the range of 7-9%. The company expects adjusted earnings per share in a band of $5.55 to $5.75 for the quarter.
Reliance Steel & Aluminum Co. Price and Consensus
Zacks Rank & Key Picks
Reliance Steel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the industrial products space are Alcoa Corp. AA, Greif, Inc. GEF, each flaunting a Zacks Rank #1 (Strong Buy), and Century Aluminum Company CENX, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alcoa has a projected earnings growth rate of roughly 637.9% for the current year. The company’s shares have skyrocketed 284.4% over the past year.
Greif has an expected earnings growth rate of around 63.7% for the current fiscal. The company’s shares have gained 72.8% over the past year.
Century has an expected earnings growth rate of 123.1% for the current year. The company’s shares have jumped 99.2% over the past year.
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