Can Reliance Steel (RS) Maintain Its Earnings Streak In Q2?
Zacks Investment Research | Jul 18, 2016 03:30AM ET
Reliance Steel & Aluminum Co. (NYSE:RS) is set to release its second-quarter 2016 results before the opening bell on Jul 21.
In the last quarter, the company had delivered a positive earnings surprise of 17.05%. The company gained from improved operational performance and strong customer demand across most of its end markets. However, reduced sales volumes and lower metal prices weighed on its revenues in the quarter.
Reliance Steel has beaten earnings estimates in the trailing four quarters with an average beat of 10.95%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Reliance Steel, in its first-quarter 2016 call, said that it expects overall sales volumes to remain flat or increase up to 2% sequentially in the second quarter due to the slow growth of the U.S. economy. Underlying demand is also expected to increase modestly in the second quarter compared to the first. The company expects adjusted earnings for the second quarter in the band of $1.15 to $1.25 per share.
Reliance Steel should benefit from improved pricing environment in the second quarter. The company is optimistic about metal pricing in the second quarter due to recent mill price rises. It sees average selling price in the June quarter to be up around 3% to 5% sequentially.
Moreover, steel market conditions in the U.S. have improved of late, thanks to favorable rulings (leading to levy of tariffs on imports) on steel trade cases in the recent past. These punitive actions have led to a reduction in steel imports.
Reliance Steel should also continue to benefit from its strategic acquisitions and strength across aerospace and automotive markets in the June quarter. Demand in the aerospace market is being supported by higher commercial aerospace build rates. The automotive market is witnessing strong demand, backed by the company’s toll processing businesses in the U.S. and Mexico as well as increased use of aluminum in the industry. Reliance Steel expects sustained momentum across these markets in 2016.
Synergies from acquisitions should also support Reliance Steel’s results in the second quarter. Reliance Steel continues with its aggressive acquisition strategy to drive growth.
Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.