Reliance Steel & Aluminum Co. (RS) announced that it has bought National Specialty Alloys, LLC (“NSA”). Based in Houston, Texas, NSA is a global specialty alloy processor and distributor of premium stainless steel and nickel alloy bars and shapes. The terms of the transaction were undisclosed.
The acquisition of NSA will boost Reliance’s portfolio while adding specialty stainless steel and nickel products. Moreover, this will further increase Reliance’s presence into the energy market. NSA is a strong provider of customer services and has been on the expansion mode by entering into new markets in different locations.
NSA owned by a consortium of investors led by Post Oak Energy Capital LP of Houston, reported net sales of $96 million for twelve months ended October 31, 2011. As per Reliance, NSA will operate as a wholly-owned subsidiary under its current management.
Reliance Steel released its fourth-quarter results in February 2012. The company reported earnings of 91 cents per share in the fourth quarter of 2011, which exceeded the Zacks Consensus Estimate of 78 cents. For full-year 2011, Reliance Steel posted net income of $343.8 million or $4.58 per share compared with $194.4 million or $2.61 per share in 2010.
Revenues surged 28% year over year to $2.03 billion in the fourth quarter. The number of metal tons sold started off slow in the quarter and gradually picked up leading to a solid demand environment. For the full year, sales increased 29% to $8.13 billion.
During 2011, energy, agriculture and mining, aerospace, semiconductor and electronics, and toll processing businesses, experienced significant improvements over 2010. The non-residential construction market showed marginal improvement, but significantly lagged compared to other markets.
The prices of most of the metals that the company sells increased during the fourth quarter and the company expects overall pricing to remain relatively strong throughout the first quarter of 2012. Further, Reliance Steel expects prices to remain volatile through 2012 with scrap, other raw material input costs and imports playing a major role in pricing trends.
The company believes that demand will continue to improve slowly, but steadily except for the energy aerospace, heavy equipment and auto industries, where it anticipates higher than average growth. Based on these expectations, earnings per share in 2012 are expected to be higher than 2011. Further, the company estimates earnings per share in the range of $1.15 to $1.25 for the first quarter of 2012.
Reliance Steel competes with Metals USA Holdings Corp. (MUSA) and Worthington Industries Inc. (WOR). We currently have a long-term Neutral recommendation on Reliance Steel. The stock maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.
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