Reliance Steel & Aluminum Co. (RS – Free Report) is benefiting from strong demand across key end-use markets, a diversified product base and strategic acquisitions. Shares of the company have shot up 32% so far this year.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks poised to carry the momentum ahead.
Reliance Steel currently carries a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.
Let’s delve deeper into the factors that make this metals service center company an attractive choice for investors right now.
Estimates Going Up
Over the past three months, the Zacks Consensus Estimate for Reliance Steel for 2021 has increased around 9.1%. The consensus estimate for fourth-quarter 2021 has also been revised 11.5% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
Healthy Growth Prospects
The Zacks Consensus Estimate for earnings for the current year for Reliance Steel is currently pegged at $20.41, reflecting an expected year-over-year growth of 164.7%. Moreover, earnings are expected to register a 159.7% growth in the fourth quarter of 2021.
Positive Earnings Surprise History
Reliance Steel has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 4.4%, on average.
Demand in non-residential construction, Reliance Steel’s biggest end-market, has gradually increased and is nearing pre-pandemic levels. Demand in this market is expected to remain healthy on the back of solid bidding activity. The company expects demand in this market to continue to improve through the remainder of 2021 on the back of solid quoting activity, favorable customer sentiments and industry indicators. Reliance Steel is also witnessing strength across semiconductors and improved demand in the energy market. It remains optimistic about the business environment and sees robust or recovering demand in the majority of its end markets.
Reliance Steel continues with its aggressive acquisition strategy. With the acquisition of Metals USA, it added about 48 service centers that, are strategically located throughout the United States. The buyout of Tubular Steel also boosts the company’s long-term growth strategy and strength by expanding its product portfolio as well as end-market diversification.
The acquisition of Fry Steel Company is also in sync with Reliance Steel’s business model and strategy of investing in high-quality and high-margin businesses. This move supports the company’s customer base and product diversification strategy. The acquisition of Merfish United has also enabled the company to focus on adjoining businesses beyond traditional metal service centers and has broadened its exposure to the copper and plastic products domain.
Higher metals prices are also driving the company’s performance and will likely continue to support its top line and margins. The company anticipates its average selling price per ton sold for the fourth quarter of 2021 to go up in the range of 5-7%.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nutrien Ltd. (NTR – Free Report) , The Chemours Company (CC – Free Report) and Intrepid Potash, Inc. (IPI – Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien has an expected earnings growth rate of 212.2% for the current year. The Zacks Consensus Estimate for NTR’s current-year earnings has been revised 10.6% upward over the last 60 days.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 73.5%, on average. NTR has rallied around 44% in a year.
Chemours has a projected earnings growth rate of 105.1% for the current year. CC’s consensus estimate for the current year has been revised 10% upward over the last 60 days.
Chemours beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 34.2%. CC has gained around 26% in a year.
Intrepid Potash has a projected earnings growth rate of 244.7% for the current year. The consensus estimate for IPI’s current year has been revised 3.3% upward over the last 60 days.
Intrepid Potash beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 132.9%, on average. IPI shares have surged around 158% in a year.