Reliance Steel & Aluminum Co. operates as a metals service center company. The company provides metals processing services and distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium, and specialty steel products. Its principal processing services comprise cutting, leveling, sawing, machining, and electro polishing. The company also fabricates and distributes structural steel components and parts; provides metal components and inventory management services; and distributes special alloy steel bar and heavy-wall tubing products to oil and gas industries, as well as offers aluminum bronze and cut to size materials. In addition, it provides a range of metal perforating and fabrication services; distributes aerospace metals; and offers alloy, carbon, and stainless steel bar and plate products. Reliance Steel & Aluminum Co. serves general manufacturing, non-residential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, heavy industry, and related industries. The company sells its products to OEM customers, small machine shops, and fabricators. As of February 19, 2015, it operated through a network of metals service centers in approximately 300 locations in 39 states in the United States, as well as in Australia, Belgium, Canada, China, France, Malaysia, Mexico, Singapore, South Korea, Turkey, the United Arab Emirates, and the United Kingdom. The company was founded in 1939 and is headquartered in Los Angeles, California.
(Summary) (Company) (Daily Chart)
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23 April 2015
Price $62.69 1yr Target $64.60 Analysts 10 1yr Cap Gain 3.04% Dividend $1.60 Yield 2.55% 1yr Est Tot Return 5.59% 3yr DivGR 42.36% 5yr DivGR 28.47% P/E 13.25 PEG 1.40 |
Market Cap $4.69 Bil
Beta 1.70 EPS (ttm) $4.73 Payout Ratio 33.82% EPS next yr $5.37 Forward P/E 11.67 Debt/Equity 0.57 ROA 4.80% ROE 9.20% ROI 7/00% Sales $10.45 Bil Income $371.50 Mil Profit Margin 3.55% |
The Metal Services Industry
Metals Service Centers carbon steel, aluminum, stainless steel, brass, copper, titanium, and alloy steel from metals producers and process them to customer specifications, including custom lengths, widths, shapes and surface characteristics. The specialized equipment used to process the metals requires high-volume production to be cost effective. Metals service centers like Reliance Steel & Aluminum Co. provide customers with readily available inventory, value-added metals processing, reliable and timely delivery, flexible minimum order size and quality control. They respond to a niche market created with a focus on just-in-time inventory management and materials management outsourcing in the capital goods and related industries.
A recent industry trend in this sector has been for metals service centers to consolidate their operations and reduce costs. Some of the driving factors forcing this to occur include the high costs of maintaining state-of-the-art processing and distribution equipment, a lack of access to low-cost capital, the economies of scale in purchasing metal, an increased requirement for advanced information systems, and a generational turnover in factory ownership. As the largest metals service center company in North America, Reliance will continue to be an active and strategic acquirer of other metals service companies and at the forefront of the ongoing consolidation in this large and still fragmented industry. Reliance Steel and Aluminum's financial strength, management philosophy, and acquisition expertise should enable this company to continue to grow and prosper.
A recent industry trend in this sector has been for metals service centers to consolidate their operations and reduce costs. Some of the driving factors forcing this to occur include the high costs of maintaining state-of-the-art processing and distribution equipment, a lack of access to low-cost capital, the economies of scale in purchasing metal, an increased requirement for advanced information systems, and a generational turnover in factory ownership. As the largest metals service center company in North America, Reliance will continue to be an active and strategic acquirer of other metals service companies and at the forefront of the ongoing consolidation in this large and still fragmented industry. Reliance Steel and Aluminum's financial strength, management philosophy, and acquisition expertise should enable this company to continue to grow and prosper.
The Business of Reliance
Reliance Steel and Aluminum serves over 125,000 customers by providing metals processing, inventory management services, and quick delivery. They perform such value added process characteristics as cutting to length, blanking, slitting, burning, plasma burning, precision plate sawing, sawing, shearing, etc., before distributing metals products to manufacturers and other end-users. Through their family of companies network they offer a full line of more than 100,000 metal products and their decentralized management business model empowers the subsidiaries to excel in their own areas of expertise.
A Company of Companies
Reliance Steel and Aluminum is composed of a family of companies whose capabilities and skill sets complement each other. This close network allows Reliance to provide a high level of customer service by getting the right product to customer on time. By working together as a family they can share vital business information, establish best practices, and constantly improve. This creates strong internal relationships making Reliance possibly the best metals service center.
The following is the current list of companies that make up Reliance Steel and Aluminum.
The following is the current list of companies that make up Reliance Steel and Aluminum.
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Allegheny Steel Distributors, Inc.
Aluminum and Stainless, Inc. American Metals Corp. AMI Metals, Inc. Branco CCC Steel, Inc. Central Plain Steel Co. Chapel Steel Corp. Chatham Steel Corp. Clayton Metals, Inc. Continental Alloys & Services, Inc. Crest Steel Corp Delta Steel, Inc. Diamond Manufacturing Company Durrett Sheppard Steel Earle M. Jorgensen Company Encore Metals Feralloy Corp. Infra-Metals Company Liebovich Bros., Inc. MetalCenter Metals USA |
Metalweb, Limited
National Specialty Alloys, Inc. Northern Illinois Steel Supply Company Olympic Metals Pacific Metal PDM Steel Service Centers, Inc. Phoenix Metals Company Precision Flame Cutting and Steel, Inc. Precision Strip, Inc. Reliance Aerospace Solutions Reliance Metal center Reliance Steel Company Service Steel Aerospace Corp. Siskin Steel & Supply Co., Inc. Sugar Steel Corp. Sunbelt Steel Texas, Inc. Team Tube Toma Metals Tube Service Co. Valex Corp. Viking Materials, Inc. Yarde Metals, Inc. |
Revenues, Earnings and Dividends
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Year
2016 Est 2015 Est 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 |
Revenues
$10.55 Bil $10.21 Bil $10.45 Bil $9.22 Bil $8.44 Bil $8.13 bil $6.31 Bil $5.31 Bil $8.71 Bil $7.26 Bil $5.74 Bil $3.37 Bil $2.94 Bil $1.88 Bil |
Earnings
$5.37 $4.47 $4.73 $4.14 $5.33 $4.58 $2.61 $2.01 $6.56 $5.39 $4.82 $3.10 $2.59 $0.53 |
Dividends
$1.50 $1.40 $1.40 $1.29 $0.90 $0.48 $0.40 $0.40 $0.40 $0.32 $0.22 $0.14 $0.10 $0.09 |
Payout Ratio
27.93% 31.31% 29.59% 31.15% 16.88% 10.48% 15.32% 19.90% 6.09% 5.93% 4.56% 4.51% 3.86% 16.98% |
The Competition
Reliance Steel and Aluminum Company is part of the Steel and Iron Industry which is part of the Basic Materials Sector of the economy. Below is a list of the major corporations included in this industry and are listed in the order of their market capitalization.
- Nucor Corp (NUE)
- Steel Dynamics Inc (STLD)
- Reliance Steel and Aluminum (RS)
- US Steel (X)
- Commercial Metals Company (CMC)
- Worhtington Inds. (WOR)
- Timken Steel Corp (TMST)
My Perspective
What a difference a day can make. This company would have been a great buy yesterday. Yesterday this company closed at $57.46 and today it closed at $62.69 per share. That's a 9.10% gain and it's the majority of the estimated capital gain for the entire upcoming year. Yesterday the estimated gain would have been 12.42% and today it's 3.04% and that knocks this stock temporarily off my buy list.
The other numbers, however, look great. I like these companies that have a dividend yield of 2.55% growing at 30-40% per year, but I'm also smart enough to know that dividend growth like that probably can't continue. And the above dividend estimates confirm that analysis.
So unfortunately I wouldn't be able to convince myself to buy a stock with such a low one year estimate at this time, I can only bemoan the fact that I didn't buy into this stock yesterday. Fortunately the fundamentals will convince me to leave this company on my watch list with the expectation that sometime in the future, as analysts increase their one year estimates or the stock falls below $58 per share, I will consider accumulating shares in this company.
The other numbers, however, look great. I like these companies that have a dividend yield of 2.55% growing at 30-40% per year, but I'm also smart enough to know that dividend growth like that probably can't continue. And the above dividend estimates confirm that analysis.
So unfortunately I wouldn't be able to convince myself to buy a stock with such a low one year estimate at this time, I can only bemoan the fact that I didn't buy into this stock yesterday. Fortunately the fundamentals will convince me to leave this company on my watch list with the expectation that sometime in the future, as analysts increase their one year estimates or the stock falls below $58 per share, I will consider accumulating shares in this company.
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