Reliance’s steel and aluminum stock continues to shine

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RS is late for a shift in analyst focus

Reliance Steel & Aluminum Co. (NYSE: RS) is the largest operator of metal service centers in North America. The company will enter the earnings confessional tomorrow, April 22, before the market opens.. Reliance has managed to beat earnings expectations on three of the last four earnings reports. For the first quarter of 2020, Reliance steel and aluminum beat analysts’ estimates by a margin of $ 0.35 and reported earnings of $ 2.45 per share. For the second quarter of 2020, RS’s earnings per share (EPS) declined to $ 1.36, but still exceeded expectations by a margin of $ 0.96. For the third quarter of 2020, Reliance Steel & Aluminum add-on an increase in earnings to $ 1.87 per share and beating estimates by a margin of $ 0.27. In the last quarterly report, Reliance steel and aluminum posted EPS of $ 2.01 and missed expectations by a slight margin of $ 0.01.

Despite these earnings beats, RS is averaging a post-earnings movement of just 5.1% over the past eight quarters in any direction. This includes a 4.5% gain in July, as well as a 6.7% drop in February 2020.

On the charts, RS started April with a record $ 159.02 on April 5. Stocks are up 83% year over year, and recent consolidation has found support at their 30-day moving average. Despite the channel of higher highs, three of four hedge analysts maintain a lukewarm “hold” position on RS.

Reliance Steel & Aluminum is also offering a forward dividend of $ 2.75, equivalent to a dividend yield of 1.80%. From a fundamental business perspective, Reliance has been in decline in recent years. In 2020, revenue fell 20% and net profit fell 47.4%. Additionally, RS’s revenue is down 24% since 2018. Despite all this, Reliance Steel & Aluminum stock has reached new all-time highs and is currently trading at an extremely high price / earnings ratio of 27.01. However, the forward price-to-earnings ratio of 18.05 suggests a rapid recovery in net income. Overall, the company is likely to recover in the long term, but RS does not offer the best potential for returns at this time.

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