Will Reliance Steel (RS) Beat Q3 Earnings Estimates? - Analyst Blog

Reliance Steel & Aluminum Co. (RS) is set to release its third-quarter 2014 results ahead of the bell on Oct 23. Last quarter, the metal processor delivered a 6.47% negative surprise.
 
Reliance Steel has missed the Zacks Consensus Estimate in 3 of the trailing 4 quarters with an average negative surprise of 3.74%. The Zacks Consensus Estimate for Reliance Steel for the third quarter has remained unchanged at $1.36 per share over the last 7 days.
 
Let's see how things are shaping up for this announcement.
 
Factors to Watch For
 
Reliance Steel 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. The company sees pricing to remain essentially stable with current levels.

While pricing is expected to remain under pressure, Reliance Steel sees continued strength in the aerospace market and expects further demand improvement in second-half 2014. For automotive, the company expects strong production rates in the second half and in 2015. Higher use of aluminum in the automotive industry represents a positive for the company.
 
Energy demand, as per forecasts, is expected to be better in the second half and in the next year, while a modest improvement is expected in heavy industry. For non-residential construction, demand is improving but remains way below peak levels and the company cautiously expects further improvement in the second half and in 2015.
 
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 its results moving ahead. But it remains challenged by weak steel industry fundamentals and contends with a soft steel and metals pricing environment.

Reliance Steel will continue to focus on working capital management, maximizing profitability of its existing businesses and achieving profitable growth through both acquisitions and internal investment. Its operating and growth strategies have enabled it to achieve industry-leading operating results on a consistent basis and the company remains confident of its ability to continue its track record of success going forward.

Earnings Whispers
 
Our proven model shows that Reliance Steel has the right combination of two key ingredients to beat earnings.
 
Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction) for Reliance Steel is +2.94% - the difference between the Most Accurate estimate of $1.40 and the Zacks Consensus Estimate of $1.36. This indicates a likely positive earnings surprise.
 
Zacks Rank #3 (Hold): Reliance Steel's Zacks Rank #3 increases the predictive power of its ESP. Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
 
Stocks That Warrant a Look
 
Here are some other steel and metals companies you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
 
Nucor Corporation (NUE) has an earnings ESP of +1.33% and a Zacks Rank #2 (Buy).
 
United States Steel Corp. (X) has an earnings ESP of +16.52% and a Zacks Rank #2.

RTI International Metals, Inc. (RTI) has an earnings ESP of +11.77% and a Zacks Rank #3 (Hold).