Reliance Steel (RS) Poised On Acquisitions, Strong Demand

Zacks Investment Research | Dec 29, 2017 07:40AM ET

We issued an updated research report on Reliance Steel & Aluminum Co (NYSE:RS) on Dec 28.

Reliance Steel is gaining from its broad and diversified product base, wide geographic footprint and continued demand strength across aerospace and automotive markets and synergies of acquisitions.

Reliance Steel continues with its aggressive acquisition strategy to tap growth opportunities. The addition of Metals USA to the company’s portfolio has complemented its existing customer base, product mix and geographic footprint.

The buyout of Tubular Steel also boosts the company’s long-term growth strategy and strength by expanding its product portfolio and end-market diversification. Moreover, the acquisition of Best Manufacturing Inc. complements the company's existing service center network with its specialty high margin products, value-added processing capabilities and strong focus on customer service.

Reliance Steel has also acquired all the common stock of Ferguson Perforating Company through its fully-owned subsidiary, Diamond Manufacturing Company. Ferguson’s high value-added processing capabilities align well with the company’s inorganic growth strategy and also extend its product portfolio.

Moreover, Reliance Steel is witnessing strong demand for its products across aerospace and automotive markets. Demand in the aerospace market has been supported by higher commercial aerospace build rates. Strong demand is also witnessed in the automotive market, backed by the company’s toll processing businesses in the United States and Mexico as well as increased use of aluminum in the industry. Reliance Steel expects sustained momentum across these markets.

However, Reliance Steel is exposed to some pricing and volume pressure in the fourth quarter. The company, in its third-quarter call, noted that it expects tons sold will be down 4-6% in the fourth quarter on a sequential comparison basis. Average selling prices are also projected to be flat to down 2% in the fourth quarter compared with the third quarter.

Reliance Steel has underperformed the Zacks Investment Research

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Written By: Zacks Investment Research

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.

Show moreShow Less