Metals processor, Reliance Steel & Aluminum Co. (RS) agreed to buy Continental Alloys & Services Inc. and some affiliated companies for an undisclosed amount.
Continental, based in Houston, is a materials management company focusing on steel and alloy pipe, tube and bar products, along with the manufacture of various tools designed for energy service companies. It has 12 locations in seven countries.
Continental and its affiliates posted combined sales of about $196 million for the six months ended June 30. The deal is expected to be final within a month, subject to customary closing conditions.
In April, Reliance Steel reported its first-quarter 2011 financial results. Net income was $92.3 million or $1.23 per share in the first quarter of 2011 compared with $44.7 million or $0.60 per share in the prior-year quarter. Results surpassed the Zacks Consensus Estimate of $1.07.
The first-quarter results included a pre-tax accounting charge of $20.0 million compared with $5.0 million in the first quarter of 2010.
Quarterly sales were $1.91 billion, up 32% year over year. Results were above the Zacks Consensus Estimate of $1.84 billion. The increase was mainly attributable to a rise in price for all products during the quarter.
In the first quarter of 2011, Reliance’s tons sold were up 12% and the average price per ton sold was up 18% compared with the prior-year quarter. Carbon steel sales were 53% of revenues; aluminum sales were 17%; stainless steel sales were 16%; alloy sales were 8%; toll processing sales were 2% and other sales were 4%.
On June 24, 2011, Reliance Steel paid a dividend of $0.12 per share to shareholders of record as of June 3, 2011. The company has increased its dividend 16 times since the IPO in 1994 and has paid regular quarterly dividends for 52 consecutive years.
Reliance Steel faces stiff competition from Metals USA Holdings Corp. (MUSA) and Worthington Industries Inc. (WOR).
We maintain our Outperform recommendation on Reliance Steel. Currently, it holds a Zacks #2 Rank (Buy) on the stock.
METALS USA HLDG (MUSA): Free Stock Analysis Report
RELIANCE STEEL (RS): Free Stock Analysis Report
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