Market Overview

Analyst: Weakness In Reliance Steel & Aluminum Shares Offers Nice Entry Point Ahead Of Key Releases

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Reliance Steel & Aluminum Co (NYSE: RS) is likely to benefit from incremental strength in service center demand.

The Analyst

Longbow analyst Chris Olin upgraded shares of Reliance Steel & Aluminum from Neutral to Buy, with a $100 price target.

The Thesis

Reliance Steel & Aluminum's fourth quarter results due next week and a strong MSCI monthly report could both serve as near-term catalysts, Olin said in a note. The analyst expects the company to issue positive first quarter guidance.

The analyst sees Reliance as a best-in-class company, with a solid management team, proven track record, necessary product diversification, above-average distribution margins and balance sheet flexibility.

Orders have been trending above expectations, steel prices are moving higher, and the president is likely to rule favorably on the Section-232 investigation before the mid-April deadline, Olin said. He also expects the company to be on the M&A front.

"Demand feedback from our carbon steel contacts and recent HRC spot price movement into February/March reaffirms our bullish thesis on the domestic steel producers," Olin said.

As such, Longbow lowered its 2018 earnings per share forecast by 7 cents to $6.62, premised on updated 1H18 LIFO accounting impact. That said, the first quarter estimate of $1.95 is still above the consensus estimate, the firm added. The firm raised its 2019 earnings per share estimate by 40 cents to $7.18, assuming 2 percent shipment growth.

The Price Action

Reliance Steel & Aluminum shares are up over 4 percent over the past year.

At time of writing, shares were up 1.7 percent to $84.89.

Related Links:

Bank of America Downgrades AK Steel Two Notches On Weak Guidance, Few Catalysts

US Steel Shares Drop After Gordon Johnson Issues Sell Rating

Latest Ratings for RS

Feb 2018KeyBancMaintainsOverweightOverweight
Feb 2018Longbow ResearchUpgradesNeutralBuy
Sep 2017MacquarieInitiates Coverage OnOutperform

View More Analyst Ratings for RS
View the Latest Analyst Ratings

Posted-In: Chris Olin Longbow ResearchAnalyst Color Upgrades Analyst Ratings


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