Reliance Steel & Aluminum (RS)

We rearranged the steel coverage group investment ratings to account for recent trading strength, the divergence between the closing prices and price targets, and higher earnings outlook(s). Today’s actions were triggered by the better-than-expected carbon steel survey results and review of future market drivers. Among the major changes, we upgraded Nucor (NUE) after considering the new earnings outlook and the rising potential for a stimulus trading boost. At the same time, we lowered STLD and RS to OUTPERFORM (versus Strong Buy) following the recent surge in trading. While still positive on these two names, we would be less aggressive. Finally, we referred to the surprising level of bullishness building throughout the channel and strong survey data points. The most interesting takeaway involved steel contacts raising their year-end HRC price forecast by $100-125/ton. Continue reading

We could not identify any negative data points within the 4Q20 earnings release, or subsequent commentary provided by management, to alter the investment rating conviction on Reliance Steel & Aluminum Company (RS). This remains our TOP PICK within the steel space for CY21. Continue reading

Reliance Steel & Aluminum Company (RS) is our TOP PICK for 2021. This morning, we upgraded the shares to a STRONG BUY rating and raised the twelve-month target price to align with our latest estimate revision(s) and to reiterate confidence in the main service center market drivers (reconfirmed by December channel checks). Continue reading

Broad-based indications of strength are evident throughout the steel channels and there appears to be increasing probability of upward movement in spot market prices (looking out 3-4 quarters). The contact narrative shifted to the unusual carbon sheet and plate supply constraints, heading into a normally seasonal-slow demand period, and future production deficit anxieties.
Nucor Corporation (NUE) issued earnings outlook that may be considered disappointing by The Street. Management provided a 4Q20 EPS guidance range of $1.02-1.07. The language within this morning’s release regarding Steel Mill trends aligns with the feedback collected from our checks. We also heard from Steel Dynamics (STLD) today, which issued an adjusted 4Q20 guidance range of $0.80-0.84, beating expectations. Continue reading

We like the set-up for Reliance Steel & Aluminum Co (RS) heading into next week’s earnings report and reiterate our OUTPERFORM recommendation on the shares. After reviewing all key portfolio drivers, we see very high probability of a 3Q20 earnings beat (and favorable guidance) primarily driven by ferrous and nonferrous metals pricing strength, healthy shipment levels, a tolling recovery, and improved cost position. Continue reading

We are calling a bottom and a carbon steel market inflection (and pricing). This is the main driver behind today’s positive trading call on the steel coverage group: Upgrades of Steel Dynamics (STLD) and Nucor Corporation (NUE) and a higher target price applied to Reliance Steel & Alum (RS). Continue reading

There appears to be early support for the latest mill price increase attempt on carbon sheet. After reviewing some of the signals coming out of the steel channel this week, we expect at least one-half of the attempted +$40/ton spot adjustment to stick. For the first time since January, our survey is showing a real demand push, in addition to the modest customer sourcing panic developing in the MW region. Continue reading

We are starting formal coverage on Reliance Steel & Aluminum (RS) with an OUTPERFORM recommendation and twelve-month target price of $101/share (suggesting roughly 9% upside versus Wednesday’s closing price). Against the backdrop of relatively cautious near-term expectations for the carbon steel group, driven by weak survey results and falling prices, we believe RS is positioned to meet or beat consensus expectations for CY20 on market share improvements, cost reduction efforts and early upward momentum for nonferrous metals. Continue reading