Reliance Steel (RS) Wraps Up DuBose National Energy Buyout

Reliance Steel & Aluminum Co. RS has completed its purchase of all of the issued and outstanding capital stock of DuBose National Energy Services, Inc. (DuBose Energy) and its affiliate, DuBose National Energy Fasteners & Machined Parts, Inc. (DuBose Fasteners) for an undisclosed price.

DuBose Energy and DuBose Fasteners, which had combined net sales of $36.3 million for the fiscal year ended Jun 30, 2017, specialize in fabrication, supply and distribution of metal and metal products to the nuclear industry including utilities, component manufacturers and contractors.

Reliance Steel noted that the acquisitions are in sync with its strategy to purchase niche businesses that offer specialty products with high levels of value-added processing capabilities at attractive returns.

Reliance Steel’s shares have moved up 24.5% in the last six months, outperforming the industry’s 11.1% gain.

Reliance Steel is gaining from its broad and diversified product base, wide geographic footprint and continued demand strength across aerospace and automotive markets and synergies of acquisitions. The company continues with its aggressive acquisition strategy to tap growth opportunities.

Reliance Steel is also expected to benefit from an improving metal pricing environment. Higher pricing contributed to its earnings in the last reported quarter. The company sees its average selling prices to increase 4% to 6% on a sequential comparison basis in first-quarter 2018. This should support its margins in the first quarter.

The company is also seeing an improvement in overall customer sentiment and demand and expects the ongoing reduction in imports will support higher metal pricing. The company is optimistic about business activity levels in first-quarter 2018 and sees continued growth in the end markets in which it operates.

Reliance Steel currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked companies in the basic materials space include Olympic Steel, Inc. ZEUS, Steel Dynamics, Inc. STLD and LyondellBasell Industries N.V. LYB, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Olympic Steel has an expected long-term earnings growth rate of 7.5%. Its shares gained around 16% over the past six months.

Steel Dynamics has an expected long-term earnings growth rate of 12%. Its shares have gained roughly 42% over the past six months.

LyondellBasell has an expected long-term earnings growth rate of 9%. Its shares have gained around 17% over the past six months.

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