Reliance Steel (RS) Up 33% YTD: What's Driving The Stock?
Zacks Investment Research | Aug 28, 2019 08:17AM ET
Shares of Reliance Steel & Aluminum Co.'s (NYSE:RS) have rallied around 33% so far this year. The company has also significantly outperformed its industry ’s rise of roughly 3% over the same time frame.
Reliance Steel, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $6.3 billion and average volume of shares traded in the last three months was around 494.2K. The company has an expected long-term earnings per share growth rate of 9%, above the industry average of 8.4%.
Let’s take a look into the factors that are driving this metals service center company.
Driving Factors
Forecast-topping earnings performance in the last two quarters and upbeat prospects have contributed to the run-up in Reliance Steel’s shares. The company’s adjusted earnings per share for the second quarter of $2.71 topped the Zacks Consensus Estimate of $2.60.
Reliance Steel, in its second-quarter call, said that it is optimistic about business conditions for the third quarter. It expects steady end-market demand in the quarter.
The company is gaining from its focus on high-margin products, continued demand strength across aerospace and automotive end-markets and contributions of strategic acquisitions.
Reliance Steel is seeing strong demand in the aerospace and automotive markets. It is witnessing demand strength for its heat-treated aluminum products in the aerospace market. Reliance Steel remains committed to boost its market share in aerospace.
Strong demand is also witnessed in the automotive market, backed by increased use of aluminum in the industry. The company is seeing healthy demand for its processing services in this market and remains committed to invest in facilities and value-added processing equipment to address the rising demand for the services it offers.
Reliance Steel also continues with its aggressive acquisition strategy to tap growth opportunities. In particular, the buyout of All Metals Holding complements Reliance Steel’s growth strategy and meets its criteria of buying high quality businesses that are immediately accretive to its earnings. All Metals’ focus on high return, toll processing and logistics services further bolsters Reliance Steel’s solid position in these areas.
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Earnings estimates for Reliance Steel are also moving up over the past two months. Over this period, the Zacks Consensus Estimate for 2019 has increased around 0.5%. The Zacks Consensus Estimate for 2020 has also moved up roughly 0.2% over the same timeframe.
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