It has been about a month since the last earnings report for Reliance Steel (RS). Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Reliance Steel due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Reliance Steel Earnings & Sales Surpass Estimates in Q2
Reliance Steel posted profits of $80.2 million or $1.24 per share in the second quarter of 2020, down from $183.1 million or $2.69 per share in the year-ago quarter.
Barring one-time items, adjusted earnings per share (EPS) were $1.36, beating the Zacks Consensus Estimate of 40 cents.
Reliance Steel recorded net sales of $2,019.3 million, down around 21% year over year. The figure surpassed the Zacks Consensus Estimate of $1,936.5 million.
Volumes and Pricing
Shipments fell 17.5% sequentially, owing to a decreased demand in nearly all of the end markets due to customer shutdowns and project delays. Moreover, demand in non-residential construction was weak during the second quarter as shelter-in-place orders caused the deferral of numerous projects.
Average prices per ton sold in the second quarter fell 11.2% year over year to $1,681. Prices also declined 3.5% on a sequential comparison basis.
Reliance Steel ended the second quarter with cash and cash equivalents of $222.7 million, up 57.4% year over year. Long-term debt was $1,426.9 million, down 29.2% year over year.
The company generated cash flow from operations of $475.7 million in the quarter, up 37.5% year over year.
Its board declared a quarterly cash dividend of 62.5 cents per share on Jul 21, payable Aug 28 to stockholders of record as of Aug 14.
Reliance Steel did not provide any specific earnings per share guidance for the third quarter due to macroeconomic uncertainty stemming from the coronavirus pandemic.
The company expects overall demand to increase slightly in the third quarter as compared to the second quarter of 2020. Shipping volumes are also expected to be affected by normal seasonal customer shutdowns and vacation schedules typical in the third quarter.
Further, the company anticipates overall metals pricing in the third quarter to remain in line with current levels.
It stated that it anticipates gross profit margin to remain near the high end of its estimate of 28-30%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 27.39% due to these changes.
Currently, Reliance Steel has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Reliance Steel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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