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Reasons to Retain Reliance (RS) Stock in Your Portfolio Now
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Reliance, Inc. (RS - Free Report) is gaining from demand strength in its major end-use markets, a diversified product base and strategic acquisitions amid pricing headwinds.
Shares of Reliance, a Zacks Rank #3 (Hold) stock, have gained 10.2% in the past year compared with a 4.5% rise of the industry.
Image Source: Zacks Investment Research
Strong Demand, Acquisitions Drive RS
Reliance is benefiting from strong underlying demand in its major markets. RS saw an uptick in demand for non-residential construction in the first quarter of 2024, particularly in sectors like public infrastructure, manufacturing and energy infrastructure. The momentum is expected to continue into the second quarter of 2024, with an anticipated ongoing strength in these sectors.
The commercial aerospace demand also remained relatively stable, a trend that Reliance predicts will continue in the second quarter, with some variability depending on supply chain factors and production rates. Military and space-related aerospace demand is expected to remain consistently strong during the same period.
Moreover, the semiconductor market showed a seasonal improvement after a flat fourth quarter of 2023. Reliance holds a positive long-term outlook for the semiconductor industry, buoyed by the CHIPS Act and major U.S. semiconductor fabrication projects.
RS has been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. The acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals are in sync with its strategy of investing in high-quality businesses.
The acquisition of Southern Steel Supply also expands the company’s reach in the Southern United States and boosts its value-added processing services. The buyout of Cooksey Iron & Metal Co also boosts Reliance's presence in the fast-growing Southeastern market. Moreover, the acquisition of American Alloy will expand Reliance's product portfolio with specialty carbon steel plates as well as new production capabilities.
Reliance projects a stronger-than-usual seasonal recovery in demand for the second quarter of 2024 despite ongoing macroeconomic and geopolitical uncertainties. The company expects its tons sold to increase by 2.5-4.5% from first-quarter 2024 levels, with about 2% of this growth coming from new acquisitions completed on Apr 1, 2024.
Soft Pricing Ails
Reliance continued to face pricing pressure in the first quarter. Its average selling price per ton sold declined around 7% year over year in the quarter. Weaker pricing hurt its sales and the bottom line in the first quarter. The company saw lower-than-expected pricing across carbon and stainless steel products. RS expects the average selling price per ton sold to decline 1-3% sequentially in the second quarter, leading to gross profit margin pressure as the company works through higher-cost inventory. Weaker prices are likely to weigh on its performance in the second quarter.
Better-ranked stocks in the basic materials space include Axalta Coating Systems Ltd. (AXTA - Free Report) , Carpenter Technology Corporation (CRS - Free Report) and ATI Inc. (ATI - Free Report) .
Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company’s shares have soared roughly 105% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axalta Coating Systems, carrying a Zacks Rank #1, has a projected earnings growth rate of 26.8% for the current year. In the past 60 days, the consensus estimate for AXTA's current-year earnings has been revised upward by 5.9%. The company’s shares have gained roughly 11% in the past year.
ATI currently carries a Zacks Rank #2 (Buy). ATI beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 8.3%. The company’s shares have rallied around 47% in the past year.
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Reasons to Retain Reliance (RS) Stock in Your Portfolio Now
Reliance, Inc. (RS - Free Report) is gaining from demand strength in its major end-use markets, a diversified product base and strategic acquisitions amid pricing headwinds.
Shares of Reliance, a Zacks Rank #3 (Hold) stock, have gained 10.2% in the past year compared with a 4.5% rise of the industry.
Image Source: Zacks Investment Research
Strong Demand, Acquisitions Drive RS
Reliance is benefiting from strong underlying demand in its major markets. RS saw an uptick in demand for non-residential construction in the first quarter of 2024, particularly in sectors like public infrastructure, manufacturing and energy infrastructure. The momentum is expected to continue into the second quarter of 2024, with an anticipated ongoing strength in these sectors.
The commercial aerospace demand also remained relatively stable, a trend that Reliance predicts will continue in the second quarter, with some variability depending on supply chain factors and production rates. Military and space-related aerospace demand is expected to remain consistently strong during the same period.
Moreover, the semiconductor market showed a seasonal improvement after a flat fourth quarter of 2023. Reliance holds a positive long-term outlook for the semiconductor industry, buoyed by the CHIPS Act and major U.S. semiconductor fabrication projects.
RS has been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. The acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals are in sync with its strategy of investing in high-quality businesses.
The acquisition of Southern Steel Supply also expands the company’s reach in the Southern United States and boosts its value-added processing services. The buyout of Cooksey Iron & Metal Co also boosts Reliance's presence in the fast-growing Southeastern market. Moreover, the acquisition of American Alloy will expand Reliance's product portfolio with specialty carbon steel plates as well as new production capabilities.
Reliance projects a stronger-than-usual seasonal recovery in demand for the second quarter of 2024 despite ongoing macroeconomic and geopolitical uncertainties. The company expects its tons sold to increase by 2.5-4.5% from first-quarter 2024 levels, with about 2% of this growth coming from new acquisitions completed on Apr 1, 2024.
Soft Pricing Ails
Reliance continued to face pricing pressure in the first quarter. Its average selling price per ton sold declined around 7% year over year in the quarter. Weaker pricing hurt its sales and the bottom line in the first quarter. The company saw lower-than-expected pricing across carbon and stainless steel products. RS expects the average selling price per ton sold to decline 1-3% sequentially in the second quarter, leading to gross profit margin pressure as the company works through higher-cost inventory. Weaker prices are likely to weigh on its performance in the second quarter.
Reliance, Inc. Price and Consensus
Reliance, Inc. price-consensus-chart | Reliance, Inc. Quote
Stocks to Consider
Better-ranked stocks in the basic materials space include Axalta Coating Systems Ltd. (AXTA - Free Report) , Carpenter Technology Corporation (CRS - Free Report) and ATI Inc. (ATI - Free Report) .
Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company’s shares have soared roughly 105% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axalta Coating Systems, carrying a Zacks Rank #1, has a projected earnings growth rate of 26.8% for the current year. In the past 60 days, the consensus estimate for AXTA's current-year earnings has been revised upward by 5.9%. The company’s shares have gained roughly 11% in the past year.
ATI currently carries a Zacks Rank #2 (Buy). ATI beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 8.3%. The company’s shares have rallied around 47% in the past year.