Reliance Steel & Aluminum Co. RS posted profits of $80.2 million or $1.24 per share in the second quarter of 2020, down from $183.1 million or $2.69 per share in the year-ago quarter.
Barring one-time items, adjusted earnings per share (EPS) were $1.36, beating the Zacks Consensus Estimate of 40 cents.
Reliance Steel recorded net sales of $2,019.3 million, down around 21% year over year. The figure surpassed the Zacks Consensus Estimate of $1,936.5 million.
Reliance Steel Aluminum Co. Price, Consensus and EPS Surprise
Volumes and Pricing
Shipments fell 17.5% sequentially, owing to a decreased demand in nearly all of the end markets due to customer shutdowns and project delays. Moreover, demand in non-residential construction was weak during the second quarter as shelter-in-place orders caused the deferral of numerous projects.
Average prices per ton sold in the second quarter fell 11.2% year over year to $1,681. Prices also declined 3.5% on a sequential comparison basis.
Financials
Reliance Steel ended the second quarter with cash and cash equivalents of $222.7 million, up 57.4% year over year. Long-term debt was $1,426.9 million, down 29.2% year over year.
The company generated cash flow from operations of $475.7 million in the quarter, up 37.5% year over year.
Its board declared a quarterly cash dividend of 62.5 cents per share on Jul 21, payable Aug 28 to stockholders of record as of Aug 14.
Outlook
Reliance Steel did not provide any specific earnings per share guidance for the third quarter due to macroeconomic uncertainty stemming from the coronavirus pandemic.
The company expects overall demand to increase slightly in the third quarter as compared to the second quarter of 2020. Shipping volumes are also expected to be affected by normal seasonal customer shutdowns and vacation schedules typical in the third quarter.
Further, the company anticipates overall metals pricing in the third quarter to remain in line with current levels.
It stated that it anticipates gross profit margin to remain near the high end of its estimate of 28-30%.
Price Performance
Reliance Steel’s shares have gained 8.3% in the past year against the industry’s 7.6% decline.
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Zacks Rank & Other Stocks to Consider
The company currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the basic materials space are Royal Gold, Inc. RGLD, Equinox Gold Corp. EQX andHarmony Gold Mining Company Limited HMY.
Royal Goldhas a projected earnings growth rate of 62.1% for the current year. The company’s shares have gained 13.2% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Equinox Gold has a projected earnings growth rate of 65.5% for the current year. The stock has gained around 90% in a year. It currently has a Zacks Rank of 2.
Harmony Gold has an expected earnings growth rate of 264.3% for 2020. The company’s shares have rallied 156.8% in the past year.It is presently a Zacks #2 Ranked player.
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