Reliance Steel & Aluminum Co. RS is set to release its first-quarter 2015 results ahead of the bell on Apr 23. Last quarter, the metal processor delivered a 5.61% negative surprise.
Reliance Steel's earnings have missed the Zacks Consensus Estimate in the trailing 4 quarters with an average negative surprise of 4.58%. The Zacks Consensus Estimate for the first quarter has declined by a penny to $1.03 per share over the last 7 days.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Reliance Steel sees higher sales volumes in first-quarter 2015 on a sequential comparison basis. But selling prices and margins are expected to contract in the quarter. Persistent high levels of metal imports are expected to continue to pressurize steel prices. The company expects adjusted earnings for the quarter to be in the band of $1.00 to $1.10 per share.
Reliance Steel is expected to gain from continued strength in aerospace and automotive markets in the March quarter. The company expects strong automotive production rates. Aerospace demand is expected to improve further this year along with an improvement in pricing. Higher use of aluminum in the automotive industry represents a positive for the company.
However, energy demand is expected to continue to remain under pressure given weak oil prices. For non-residential construction, demand continues to improve but remains way below its peak levels.
Reliance Steel is well placed to leverage the strong momentum across a number of end markets, including automotive and aerospace. Strategic acquisitions and expansion of existing operations should also support its results. But it remains challenged by weak steel industry fundamentals and contends with soft steel and metals pricing environment.
Earnings Whispers
Our proven model shows that Reliance Steel is likely to miss earnings estimates this quarter. This is because the stock has a negative Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #4 (Sell).
Negative Zacks ESP: The Earnings ESP for Reliance Steel is -2.91% – the difference between the Most Accurate estimate of $1.00 and the Zacks Consensus Estimate of $1.03. This indicates a likely negative surprise.
Zacks Rank #4 (Sell): Reliance Steel’s Zacks Rank #4, when combined with a negative ESP, indicates an earnings miss. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some stocks in the steel and related industries that you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Nucor Corporation NUE has an earnings ESP of +7.14% and a Zacks Rank #3 (Hold).
AK Steel Holding Corporation AKS has an earnings ESP of +4.17% and a Zacks Rank #3 (Hold).
Valmont Industries, Inc. VMI has an earnings ESP of +1.97% and a Zacks Rank #3 (Hold).
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