Reliance Steel (RS) Snaps Up Northern Illinois Steel Supply - Analyst Blog

Reliance Steel (RS) has acquired Illinois-based steel and metal products distributor Northern Illinois Steel Supply Co. The financial terms of the deal were not disclosed. 

 

Northern Illinois Steel fabricates and distributes a range of steel and non-ferrous metal products, mainly structural steel components and parts. The entity, which has annual sales of $20.3 million, focuses on customers requiring extensive fabrication services and critical delivery timelines with a significant concentration in energy and petrochemical sectors.

 

Northern Illinois Steel will operate as a fully-owned unit of Reliance Steel and its current management will remain in place. The acquisition is in sync with Reliance Steel's strategy of buying companies which offer higher value-added services.  

 

Reliance Steel continues its aggressive acquisition strategy to incite growth. The acquisition of steel and aluminum components maker – Metals USA, which the company completed in April 2013, is meaningfully contributing to its top-line growth.  Reliance Steel remains focused on acquiring businesses that support its diversification strategy.

 

Reliance Steel's profit rose by double-digits in the second quarter of 2014 on increased sales but its earnings missed expectations. It expects the demand environment to improve in the third quarter at a modestly higher rate than the second amid a slow but steady recovery in the U.S. economy.

 

Reliance Steel is well placed to leverage the strong momentum across a number of end markets, including automotive and aerospace. Strategic acquisitions and expansion of existing operations should also aid to its results moving ahead. But the company remains challenged by weak steel industry fundamentals and contends with a soft steel and metals pricing environment.

 

Reliance Steel is a Zacks Rank #3 (Hold) stock.

 

Other metals companies having favorable Zacks Rank are NN Inc. (NNBR), NSK Ltd. (NPSKY) and Century Aluminum Co. (CENX), with all holding a Zacks Rank #1 (Strong Buy).