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Reliance Steel (RS) Gains on Strong Demand, Acquisitions

Reliance Steel (RS) is benefiting from healthy demand, higher prices and acquisitions.

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This story originally appeared on Zacks

Reliance Steel & Aluminum Co. RS is benefiting from strong demand across key end-use markets, a diversified product base and strategic acquisitions.

- Zacks

Shares of Reliance Steel have gained 37.4% in the past year compared with 82.2% surge of the industry.

Zacks Investment Research

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Reliance Steel, a Zacks Rank #2 (Buy) stock, is optimistic about the business environment and sees robust demand in the majority of its end markets. Demand in non-residential construction, its biggest end-market, has gradually increased and is nearing pre-pandemic levels. Demand in this market is expected to remain healthy through 2021 on the back of solid bidding activity. Moreover, the company is seeing a turnaround in small projects that can be completed as a result of supply constraints and price increases. It is also witnessing strength in semiconductors and improvement in the energy market.

Reliance Steel continues with its aggressive acquisition strategy. With the acquisition of Metals USA, it added about 48 service centers that, are strategically located throughout the United States. The buyout of Tubular Steel also boosts the company’s long-term growth strategy and strength by expanding its product portfolio as well as end-market diversification.

The acquisition of Fry Steel Company is in sync with Reliance Steel’s business model as well as the strategy of investing in high-quality and high-margin businesses. This move supports the company’s customer base and product diversification strategy.

The company recently agreed to acquire Merfish United, a leading master distributor of tubular building products in the United States. The acquisition supports its product and geographical diversification strategy, significantly broadening its exposure to copper and plastic products. The buyout will also help Reliance Steel create a foothold in the adjacent industrial distribution space.

Higher metals prices are also driving the company’s performance and will likely continue to support the top line and margins. The company anticipates its average selling price per ton sold for the third quarter to go up in the range of 7-9%.

 

Other Stocks to Consider

Some other top-ranked stocks in the basic materials space are Nucor Corporation NUE, Dow Inc. DOW and Cabot Corporation CBT.

Nucor has a projected earnings growth rate of around 494% for the current year. The company’s shares have soared 147.7% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dow has an expected earnings growth rate of around 403.01% for the current year. The company’s shares have gained 27.8% in the past year. It currently holds a Zacks Rank #2.

Cabot has an expected earnings growth rate of around 138.5% for the current fiscal. The company’s shares have rallied 39% in the past year. It currently carries a Zacks Rank #2.



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