RS is overdue for a shift in analyst attention
Reliance Steel & Aluminum Co. (NYSE: RS) is the largest operator of metal service centers in North America. The company will enter the profit denomination tomorrow, April 22nd, before the market opens.. Reliance has managed to beat earnings expectations in three of the last four earnings reports. For the first quarter of 2020 Reliance Steel & Aluminum Analysts’ estimates were exceeded by $ 0.35 and posted earnings of $ 2.45 per share. For the second quarter of 2020, earnings per share (EPS) declined from RS to $ 1.36 but beat expectations with a margin of $ 0.96. For the third quarter of 2020 Reliance Steel & Aluminum reports A surge in earnings that rose to $ 1.87 per share, beating estimates by $ 0.27. In the last quarterly report Reliance Steel & Aluminum posted earnings per share of $ 2.01, falling short of expectations with a slight margin of $ 0.01.
Despite these earnings volatility, RS has seen an average post-earnings move of just 5.1% over the past eight quarters, regardless of direction. This includes an increase of 4.5% in July and a decrease of 6.7% in February 2020.
On the charts, RS started April 5th with a record high of $ 159.02. Stocks are up 83% year-over-year and recent consolidation was supported on their 30-day moving average. Despite the channel’s higher high, three out of four analysts have a lukewarm stance on RS in their reporting.
Reliance Steel & Aluminum also offers a forward dividend of $ 2.75, which translates to a dividend yield of 1.80%. From a fundamental business perspective, Reliance has been in decline for the past few years. In 2020, revenue fell 20% and net income fell massively by 47.4%. Additionally, RS sales have declined 24% since 2018. Even so, Reliance Steel & Aluminum stock has hit new highs and is currently trading at a sky-high price-to-earnings ratio of 27.01. However, the forward price / earnings ratio of 18.05 suggests a rapid rebound in bottom line results. Overall, the company should rebound over the long term, but RS does not offer the best return potential right now.