Reliance Steel & Aluminum Company (RS: 41.49 0.00 0.00%) recently provided fourth quarter earnings guidance much higher than the Zacks Consensus. Is this a sign that the global recovery is taking hold?
Company Description
Reliance Steel provides metals processing services through more than 200 locations in 38 states, and several countries including Mexico, China, South Korea and Canada. Its products include galvanized, hot-rolled and cold-finished steel, stainless steel, aluminum, brass, copper, titanium and alloy steel.
Zacks Consensus Estimates Rise Ahead of the Earnings Report
Its been well over a year since I’ve covered any steel companies for the Value Rank Buy as the estimate picture hasn’t been pretty during that time.
However, that appears to be changing.
On Jan 20, Reliance Steel provided earnings guidance for the fourth quarter and full year which was well ahead of the Zacks Consensus Estimates. The company said both demand and pricing levels were at levels better than expected even given the fourth quarter seasonal pressures that it normally experiences.
Earnings per share for the fourth quarter are expected to be in the range of 95 cents to $1.05 per share. The Zacks Consensus called for 38 cents.
For the full year, EPS is expected to be $1.71 to $1.81 per share. The Zacks Consensus had been at $1.14.
On the news, the analysts scrambled to raise estimates. The fourth quarter Zacks Consensus jumped 165.79% to $1.01 per share in just the last month.
Similarly, the 2009 Zacks Consensus Estimate has also climbed during that same time period to $1.78 which is at the high end of the company’s guidance. 9 estimates have been revised higher in the past month.
Because of the earnings guidance for 2009, analysts are also extremely bullish on 2010 earnings. They expect earnings growth of 96.34%. 6 estimates have been revised higher in the last 30 days with the Zacks Consensus jumping 25 cents to $3.50 per share.
Reliance is scheduled to report fourth quarter and full year results on Feb 18.
Reliance Steel Surprised on the Third Quarter
On Oct 22, Reliance Steel reported its third quarter results and beat the Zacks Consensus by 26.67%. Earnings per share were 57 cents compared with the Zacks Consensus of 45 cents.
Sales, however, fell to $1.24 billion from $2.57 billion in the year ago and were flat compared with the second quarter of 2009. Average price per ton sold fell 34% compared to the year ago quarter and was flat compared with the 2009 second quarter.
Value Fundamentals
Reliance Steel is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 1.18. The company also has a stellar 5-year average return on equity (ROE) of 20.57%.
Reliance rewards shareholders with a dividend yielding 1.00% which is higher than the industry average which is no dividend at all.
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