Strong demand across key end-use industries, a broad product base, and savvy acquisitions benefited Reliance Steel & Aluminum Co. (NYSE:RS).
Reliance Steel & Aluminum Co. (NYSE:RS) stock price has increased by 25.3% over the past year, above the industry’s 6.7% growth.
The bulk of Reliance Steel & Aluminum Co. (NYSE:RS) end markets is experiencing healthy underlying demand, helping the Zacks Rank #3 (Hold) company. Non-residential construction, the company’s primary market, increased demand during the second quarter. Non-residential building activity in the business’s key markets is expected to continue steadily through the third quarter, and the company is cautiously optimistic about this trend continuing.
Markets for semiconductors and energy (oil and natural gas) are booming, which is good news for the firm. Toll processing services it offers the car industry are in high demand, and this is so even if global microprocessor shortages have harmed manufacturing output. Also, the commercial aerospace industry saw a rise in demand during the second quarter.
As part of its central business policy, the company has recently adopted an aggressive acquisition strategy to boost its operating results. Recent purchases of Rotax Metals, Admiral Metals, and Nu-Tech Precision Metals are consistent with the company’s policy of purchasing successful companies.
Rotax Metals broadens the company’s product offering by including a wider variety of specialist bronze, brass, and copper items. Reliance Steel’s standing in the market stands to strengthen thanks to the addition of Admiral Metals, a Massachusetts-based metal distributor known for its excellent customer service and flexible next-day delivery options.
With its patented processes and quality certifications, Nu-Tech has earned a strong reputation in the primary markets it serves, and the company has also shown its willingness to back Reliance Steel’s efforts to diversify its client base, product offerings, and geographic footprint. RS believes the acquisition will help it expand into the nuclear and aerospace markets.
On the other hand, Reliance Steel & Aluminum Co. (NYSE:RS) faces risks associated with price inflation due to rising input and other costs. Fuel, shipping, packing, and labor costs are increasing. Second-quarter sales and marketing costs were up almost 11% from the same period a year ago, after being adjusted for inflation. Inflationary pressure is anticipated to drag on firm performance in the third quarter of 2022.
Lower anticipated shipments and pricing in the third quarter are also a concern. Standard seasonal patterns, such as lower shipping volumes owing to planned client shutdowns and vacation plans, are expected to influence the company’s cargo levels in the third quarter. Tons sold are expected to be down 3-5% for Reliance Steel & Aluminum Co. (NYSE:RS) in the third quarter compared to the second quarter. The average selling price per tonne sold is also projected to be down 5-7% sequentially in the third quarter, led by reduced pricing for many of its goods, especially for carbon, stainless, and aluminum flat-rolled products.
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