What Makes Reliance Steel (RS) Stock a Solid Choice Right Now
Reliance Steel & Aluminum Co. RS benefits from healthy demand across its major end-use markets, a diversified product base and strategic acquisitions.
We are optimistic about its prospects and believe that the time is right to add the stock to the portfolio as it looks poised to carry the momentum ahead.
Reliance Steel carries a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s take a look into the factors that make Reliance Steel an attractive choice for investors right now.
An Outperformer
Shares of Reliance Steel have gained 28.9% over a year against the 23.4% decline of its industry. It has also outperformed the S&P 500’s roughly 11.4% decline over the same period.
Image Source: Zacks Investment Research
Positive Earnings Surprise History
Reliance Steel’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 13.4%.
Superior Return on Equity (ROE)
Reliance Steel’s ROE of 27%, as compared with the industry average of 18%, manifests the company’s efficiency in utilizing shareholder’s funds.
Growth Drivers in Place
Reliance Steel is seeing strong demand in its major markets. Higher demand is likely to drive its volumes in the first quarter of 2023.
Demand in non-residential construction, its largest market, remained healthy in the fourth quarter. The company is optimistic that demand for non-residential construction activity in the key areas in which it operates will remain at healthy levels into the first quarter of 2023.
Reliance Steel also saw strength in the semiconductors market in the fourth quarter. The company also witnessed increased demand for the toll processing services that it provides to the automotive market due to increased production rates by certain automotive manufactures despite the impact of supply-chain challenges.
Additionally, demand in commercial aerospace improved during the quarter and the company is cautiously optimistic that demand will continue to improve in the first quarter. Demand in energy (oil and natural gas) also remained stable year over year in the fourth quarter and the company is cautiously optimistic that demand will improve in the first quarter.
The company has also been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. Its latest acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals are in sync with its strategy of investing in high-quality businesses.
Reliance Steel & Aluminum Co. Price and Consensus
Reliance Steel & Aluminum Co. price-consensus-chart | Reliance Steel & Aluminum Co. Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Steel Dynamics, Inc. STLD, Olympic Steel, Inc. ZEUS and Nucor Corporation NUE.
Steel Dynamics currently sports a Zacks Rank #1. The Zacks Consensus Estimate for STLD's current-year earnings has been revised 26.4% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Steel Dynamics’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3%, on average. STLD has gained around 30% in a year.
Olympic Steel currently sports a Zacks Rank #1. The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 60.6% upward in the past 60 days.
Olympic Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2%, on average. ZEUS has rallied around 48% in a year.
Nucor currently carries a Zacks Rank #1. The Zacks Consensus Estimate for NUE’s current-year earnings has been revised 10.7% upward in the past 60 days.
Nucor beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 7.7% on average. NUE’s shares have gained roughly 3% in the past year.
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Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report
Nucor Corporation (NUE) : Free Stock Analysis Report
Reliance Steel & Aluminum Co. (RS) : Free Stock Analysis Report
Olympic Steel, Inc. (ZEUS) : Free Stock Analysis Report
