Reliance Steel (RS) Misses Q3 Earnings, Revenue Estimates

Reliance Steel (NYSE:RS) posted a profit, as reported, of $49.5 million or 68 cents per share in the third quarter of 2016, down around 4% from $51.4 million or 69 cents per share a year ago.

Barring one-time items, the company logged earnings of $1.25 per share in the reported quarter that missed the Zacks Consensus Estimate of $1.31.

Revenues, Volume and Pricing

Revenues declined around 4% year over year to $2,185.2 million in the reported quarter, falling short of the Zacks Consensus Estimate of $2,201 million. Sales were affected by lower overall pricing and volumes. Overall metals demand also weakened more than the company had anticipated, in the third quarter.

Overall sales volume declined 2.7% year over year in the quarter with average prices per ton going down 1.8% year over year.

Financials

Reliance Steel ended the quarter with cash and cash equivalents of $143.3 million, up roughly 52% year over year. Long-term debt decreased roughly 15% year over year to $1,679.7 million. Cash flow from operations for the third quarter was $182.4 million. Net debt-to-capital ratio was 32.2% as of Sep 30, 2016, down from 33.8% a year ago.

Reliance Steel did not repurchase any shares during the nine months ended Sep 30, 2016. It had 8.4 million shares available for buyback under its existing share repurchase program at the end of the third quarter.

Outlook

Going forward, Reliance Steel is cautious about business activity levels and metals pricing in the fourth quarter. The company expects overall sales volumes to be down 5%-7% in the fourth quarter compared with the third.

Reliance Steel envisions metals pricing for most of its products to witness sustained downward pressure in the fourth quarter. The company anticipates its average selling price in the fourth quarter to be down 1% to 3% sequentially. The company noted that overall weaker demand and the normal seasonal factors have contributed to pricing pressure. Reliance Steel expects adjusted earnings for the fourth quarter in the band of 65 cents to 75 cents per share.

Reliance Steel currently holds a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked companies in the basic materials space include AK Steel Holding Corporation (NYSE:AKS) , Ryerson Holding Corporation (NYSE:RYI) and Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) .

AK Steel has a Zacks Rank #2 (Buy). The company has an expected earnings growth of 194.1% for the current year. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Ryerson Holding has an expected earnings growth of around 228.9% for the current year. The stock carries a Zacks Rank #2.

Schnitzer Steel, currently holding a Zacks Rank #2, has an expected earnings growth of roughly 275% for the current year.

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