Credit: Shutterstock photoReliance Steel & Aluminum Co.RS topped earnings expectations in the third quarter of 2015, but recorded lower profits owing to continued pressure on metal prices. Profit, as reported, decreased 46.2% year over year to $51.4 million (or 69 cents per share) in the quarter from $95.5 million ($1.21 per share) a year ago.
Barring pre-tax impairment and restructuring charges, the company registered earnings of $1.16 per share in the reported quarter that surpassed the Zacks Consensus Estimate of $1.03 by a wide margin. Reliance Steel continued to gain from improved operational performance and strong customer demand across most of its end markets.
Reliance Steel & Aluminum Company - Earnings Surprise | FindTheBest
Revenues, Volume and Pricing
Revenues declined around 15.5% year over year to $2,286.2 million in the reported quarter, falling short of the Zacks Consensus Estimate of $2,387 million. Lower sales volumes hurt the top line.
Overall sales volume fell 3.9% year over year in the quarter, with average prices per ton down 12.7% year over year.
Financials
Reliance Steel ended the quarter with cash and cash equivalents of $94.1 million, down roughly 6.6% year over year. Long-term debt decreased roughly 10.9% year over year to around $1.99 billion. Net debt-to-capital ratio was 33.8% at the end of the quarter, down from 35.1% a year ago.
Reliance Steel repurchased 2.5 million shares for $142.3 million during the third quarter of 2015. Moreover, it repurchased 5.95 million shares for a total of $342.3 million, at an average price of $57.50 per share during the first nine months of 2015. The company adjusted its current share repurchase program and increased the number of shares to be repurchased under the authorization by 7.5 million through Dec 2018.
Outlook
Moving forward, Reliance Steel anticipates the U.S economy to witness slow but modest growth. However, it expects continued challenges for its business activities and metal pricing in fourth-quarter 2015.
These factors led management to expect overall sales volumes to decline around 4−5% sequentially in the fourth quarter of 2015. Reliance Steel also anticipates lower metal pricing for most of its products for the rest of 2015. Further, the company expects average selling price to decrease 1−2% sequentially in the fourth quarter. Also, it envisions fourth-quarter earnings per share in the band of 75-85 cents.
Zacks Rank
Reliance Steel currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the basic materials sector include AK Steel Holding Corp. AKS , Asanko Gold Inc. AKG and Pretium Resources Inc. PVG , all carrying a Zacks Rank #2 (Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
