Reliance Steel & Aluminum Co. (NYSE:RS) recently announced that it purchased all of Fry Steel Company’s outstanding capital stock effective Dec 31, 2019. However, the terms of the deal have been kept under wraps. Notably, Fry Steel’s owner and CEO, retired after the deal was closed.
Fry Steel is a general line and long bar supplier based in Santa Fe Springs, CA. It provides next-day “in-stock” delivery via its proprietary fleet of trucks. The company has developed a reputation for outstanding customer service and stocking hard-to-find items. Notably, Fry Steel’s net sales for the year ended Dec 31, 2019 were roughly $100 million.
Per Reliance Steel’s management, the acquisition is in sync with its business model and strategy of investing in high quality and high margin businesses.
Reliance Steel’s shares have surged 71.1% in the past year compared with the industry’s growth of 73.9%.
In October 2019, the company mentioned that it is optimistic regarding business prospects in fourth-quarter 2019. Excluding the impact of normal seasonal patterns, the company expects end demand to stay relatively steady in the fourth quarter compared with the prior quarter.
For the fourth quarter, Reliance Steel expects a sequential decrease of 4-7% in total tons sold. Overall metal pricing is anticipated to remain near the current level, which is likely to result in a sequential decline of 2-3% in its average selling price per ton sold.
Based on these expectations, the company projects adjusted earnings per share (EPS) of $1.60-$1.70 for the fourth quarter.
Reliance Steel & Aluminum Co. Price and Consensus
Zacks Rank & Stocks to Consider
Reliance Steel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the basic materials space include Daqo New Energy Corp. (NYSE:DQ) , Pan American Silver Corp. (NASDAQ:PAAS) and Sibanye Gold Limited (NYSE:SBGL) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy has projected earnings growth rate of 294.7% for 2020. The company’s shares have rallied 122% in a year’s time.
Pan American Silver has estimated earnings growth rate of 38.1% for 2020. The company’s shares have surged 57% in a year’s time.
Sibanye Gold has projected earnings growth rate of 587.5% for 2020. The company’s shares have soared 232% over a year.
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