Reliance Steel (RS) Beats On Q2 Earnings, Raises Dividend

Reliance Steel & Aluminum (NYSE:RS) saw its profits rise in the second quarter of 2016 and earnings topped expectations. Profit, as reported, rose 11.9% year over year to $100.9 million (or $1.38 per share) in the quarter from $90.2 million (or $1.20 per share) a year ago.

Barring one-time items, the company registered earnings of $1.36 per share in the reported quarter that surpassed the Zacks Consensus Estimate of $1.31. The bottom line gained from efficient inventory management and better mill prices in the quarter.

Revenues, Volume and Pricing

Revenues declined around 9.1% year over year to $2,203.9 million in the reported quarter, falling short of the Zacks Consensus Estimate of $2,337 million. Sales were affected by lower overall pricing.

Overall sales volume rose 0.7% in the quarter, with average prices per ton declining 10.1% year over year.

Financials

Reliance Steel ended the quarter with cash and cash equivalents of $116.5 million, down roughly 11.7% year over year. Long-term debt decreased roughly 19.6% year over year to $1,684.7 million. Net debt-to-capital ratio was 33.4% as of Jun 30, 2016, down from 33.9% a year ago.

Reliance Steel did not repurchase any shares during the second quarter. Also, it had 8.4 million shares available for buyback under its existing share repurchase program at the end of the quarter. The company acquired all capital stock of Best Manufacturing Inc. in the quarter.

The company declared a quarterly dividend of 42.5 cents per share, reflecting a 6.3% rise from the prior payout. The dividend is payable on Sep 9, 2016 to shareholders of record as of Aug 12.

Outlook

Going forward, the company is optimistic about the U.S. economy and recovery in demand, along with stability in metal pricing in the third quarter. Management expects overall sales volumes to be down between 1% and 3% sequentially in the third quarter due to seasonality.

Reliance Steel expects the average selling price to be up in the range of 1% to 3% sequentially in the third quarter. Adjusted earnings for the third quarter are projected to be in the band of $1.25−$1.35 per share.

Zacks Rank

Reliance Steel currently has a Zacks Rank #3 (Hold).

Some better-ranked companies in the steel space include Olympic Steel Inc. (NASDAQ:ZEUS) , ThyssenKrupp AG (OTC:TYEKF) and Schnitzer Steel Industries Inc. (NASDAQ:SCHN) , all sporting a Zacks Rank #1 (Strong Buy).