Reliance Steel & Aluminum Co. (RS) Bundle
Understanding Reliance Steel & Aluminum Co. (RS) Revenue Streams
Understanding Reliance Steel & Aluminum Co.’s Revenue Streams
Primary Revenue Sources
- Carbon Steel: $1,856.2 million (three months ended September 30, 2024)
- Aluminum: $576.3 million (three months ended September 30, 2024)
- Stainless Steel: $513.9 million (three months ended September 30, 2024)
- Alloy: $155.9 million (three months ended September 30, 2024)
- Toll Processing and Logistics: $157.1 million (three months ended September 30, 2024)
- Copper and Brass: $78.4 million (three months ended September 30, 2024)
- Other and Eliminations: $82.5 million (three months ended September 30, 2024)
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Change (in millions) |
|---|---|---|---|
| Carbon Steel | $1,856.2 | $1,996.9 | $(140.7) |
| Aluminum | $576.3 | $592.6 | $(16.3) |
| Stainless Steel | $513.9 | $557.5 | $(43.6) |
| Alloy | $155.9 | $174.4 | $(18.5) |
| Toll Processing and Logistics | $157.1 | $154.3 | $2.8 |
| Copper and Brass | $78.4 | $72.2 | $6.2 |
| Other and Eliminations | $82.5 | $75.1 | $7.4 |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, net sales were $10,708.4 million, a decrease of 6.6% from $11,468.6 million for the same period in 2023. The same-store net sales decreased by 8.5% year-over-year.
Contribution of Different Business Segments to Overall Revenue
In the nine months ended September 30, 2024, the revenue breakdown by product category was as follows:
| Product Category | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Carbon Steel | $5,894.8 | 55.0% |
| Aluminum | $1,760.2 | 16.4% |
| Stainless Steel | $1,595.6 | 14.9% |
| Alloy | $494.6 | 4.6% |
| Toll Processing and Logistics | $476.1 | 4.4% |
| Copper and Brass | $240.7 | 2.2% |
| Other and Eliminations | $246.4 | 2.3% |
Analysis of Significant Changes in Revenue Streams
The revenue decline can be attributed to a 11.4% decrease in the average selling price per ton sold, which was partially offset by a 3.7% increase in tons sold for the three months ended September 30, 2024. The average selling price per ton sold was $2,246 in Q3 2024 compared to $2,552 in Q3 2023.
The total tons sold for the three months ended September 30, 2024 were 1,521.4 thousand, up from 1,420.8 thousand in Q3 2023, representing a 7.1% increase.
This analysis highlights the company's ability to increase sales volume despite challenging pricing conditions, particularly in the carbon steel segment, which represented over 53% of total sales.
A Deep Dive into Reliance Steel & Aluminum Co. (RS) Profitability
A Deep Dive into Reliance Steel & Aluminum Co.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter ended September 30, 2024, the gross profit was $1,006.3 million, resulting in a gross profit margin of 29.4%. This compares to a gross profit of $1,077.0 million and a margin of 29.7% for the same period in 2023. For the nine months ended September 30, 2024, gross profit was $3,220.5 million with a margin of 30.1%, down from $3,525.7 million and 30.7% in 2023.
Operating income for the third quarter of 2024 was $273.4 million, representing an operating margin of 8.0%, compared to $389.5 million and 10.8% in the prior year. For the nine months, operating income totaled $1,018.2 million with an operating margin of 9.5%, down from $1,414.4 million and 12.3% in 2023.
Net income attributable to the company for Q3 2024 was $199.2 million with a net profit margin of 5.8%, compared to $295.0 million and 8.2% in Q3 2023. For the nine-month period, net income was $772.0 million, yielding a net profit margin of 7.2%, down from $1,066.7 million and 9.3% in 2023.
Trends in Profitability Over Time
Over the past year, profitability metrics have shown a downward trend primarily due to declining metals prices. The gross profit margin decreased by 0.3 percentage points year-over-year for both the third quarter and nine months. Operating income and net income also reflected significant declines, primarily influenced by lower net sales and gross profit margins.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company's gross profit margin of 29.4% for Q3 2024 is in line with the industry average of approximately 30%. However, its operating margin of 8.0% is slightly below the industry average of 9%, indicating potential room for improvement in operational efficiency.
Analysis of Operational Efficiency
The company's SG&A (Selling, General and Administrative) expenses for Q3 2024 were $665.0 million, representing 19.4% of net sales, compared to $626.9 million and 17.3% in Q3 2023. This increase reflects higher costs associated with wage inflation and increased headcounts.
Additionally, the effective inventory management has been a critical factor in mitigating the impact of lower metals pricing. The inventory turnover rate for the nine months ended September 30, 2024, was 4.6 times, compared to 4.7 times in 2023.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit | $1,006.3 million | $1,077.0 million | -6.6% |
| Gross Profit Margin | 29.4% | 29.7% | -0.3% |
| Operating Income | $273.4 million | $389.5 million | -29.8% |
| Operating Margin | 8.0% | 10.8% | -2.8% |
| Net Income | $199.2 million | $295.0 million | -32.5% |
| Net Profit Margin | 5.8% | 8.2% | -2.4% |
| SG&A Expenses | $665.0 million | $626.9 million | +6.1% |
In summary, while the company's profitability remains strong compared to industry standards, the downward trend in key metrics calls for a renewed focus on operational efficiency and cost management to enhance overall financial health.
Debt vs. Equity: How Reliance Steel & Aluminum Co. (RS) Finances Its Growth
Debt vs. Equity: How Reliance Steel & Aluminum Co. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the company had a total debt of $1.15 billion in senior unsecured notes with various maturities through 2036. Additionally, there were $125 million of outstanding borrowings under a $1.5 billion revolving credit facility.
Debt-to-Equity Ratio
The debt-to-equity ratio was calculated at 0.13 as of September 30, 2024. This ratio indicates a conservative approach to leverage, particularly when compared to the industry average of approximately 0.50.
Recent Debt Issuances and Credit Ratings
In October 2024, the company amended its credit agreement to maintain its $1.5 billion revolving credit facility. The company continues to hold an investment-grade credit rating, which supports its ability to raise capital efficiently.
Refinancing Activity
There was no significant refinancing activity reported in the last quarter, but the company has demonstrated a consistent ability to manage its debt obligations effectively, with $401.4 million of debt obligations due before the maturity of its revolving credit facility on September 10, 2029.
Debt vs. Equity Balance
The company has maintained a balanced approach to financing growth, with a net debt-to-total capital ratio of 11.5% as of September 30, 2024, up from 0.8% at the end of 2023. This indicates a strategic increase in leverage to support ongoing investments and acquisitions while still maintaining a low overall debt level.
| Debt Category | Amount (in millions) |
|---|---|
| Senior Unsecured Notes | $1,150 |
| Outstanding Revolving Credit | $125 |
| Total Debt | $1,275 |
| Debt-to-Equity Ratio | 0.13 |
| Net Debt-to-Total Capital Ratio | 11.5% |
Conclusion on Financing Strategy
The company demonstrates a disciplined approach to balancing debt and equity financing, focusing on sustainable growth through strategic acquisitions while maintaining a robust capital structure. This approach enhances its financial flexibility and supports long-term value creation for shareholders.
Assessing Reliance Steel & Aluminum Co. (RS) Liquidity
Assessing Reliance Steel & Aluminum Co.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.8, indicating a strong liquidity position, as current assets exceed current liabilities.
Quick Ratio: The quick ratio stands at 1.2, suggesting that the company can cover its short-term liabilities without needing to liquidate inventory.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is approximately $1.2 billion, reflecting an increase from $1.1 billion in 2023. This improvement signifies effective management of current assets and liabilities.
| Metric | 2024 | 2023 |
|---|---|---|
| Current Assets | $2.4 billion | $2.2 billion |
| Current Liabilities | $1.3 billion | $1.1 billion |
| Working Capital | $1.2 billion | $1.1 billion |
Cash Flow Statements Overview
Cash Flow from Operating Activities: For the nine months ended September 30, 2024, cash flow from operations was $956.5 million, a decrease from $1.15 billion in 2023.
Cash Flow from Investing Activities: Net cash used in investing activities totaled $673.4 million for the nine months ended September 30, 2024, primarily due to acquisitions totaling $366.7 million.
Cash Flow from Financing Activities: Cash used in financing activities was $1.05 billion, which included $951.3 million in share repurchases and $188.5 million in cash dividends.
| Cash Flow Activity | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $956.5 | $1,145.7 |
| Investing Activities | ($673.4) | ($367.8) |
| Financing Activities | ($1,048.7) | ($970.7) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $314.6 million in cash and cash equivalents and a net debt-to-total capital ratio of 11.5%, indicating a manageable level of debt relative to equity. Additionally, $1.37 billion remains available under the revolving credit facility, further enhancing liquidity.
Debt obligations due before the maturity of the revolving credit facility total $401.4 million, suggesting the company is well-positioned to meet its short-term financial obligations without significant liquidity risks.
Is Reliance Steel & Aluminum Co. (RS) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company is crucial for investors looking to determine whether it is overvalued or undervalued. Key metrics such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios provide insights into the company's financial health.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share were $3.61 for the third quarter and $13.55 for the nine months ended. The trailing twelve months (TTM) stock price was approximately $284.85. This results in a P/E ratio of:
P/E Ratio = Stock Price / Earnings per Share = $284.85 / $13.55 ≈ 21.0
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, was $62.50. Therefore, the P/B ratio is calculated as follows:
P/B Ratio = Stock Price / Book Value per Share = $284.85 / $62.50 ≈ 4.56
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) as of September 30, 2024, is calculated as follows:
- Total Debt: $1.15 billion
- Cash and Cash Equivalents: $314.6 million
- Market Capitalization: $6.5 billion
Thus, the EV is:
EV = Market Capitalization + Total Debt - Cash = $6.5 billion + $1.15 billion - $0.3146 billion = $7.335 billion
EBITDA for the nine months ended September 30, 2024, was $1.018 billion.
EV/EBITDA Ratio = EV / EBITDA = $7.335 billion / $1.018 billion ≈ 7.21
Stock Price Trends
The stock price over the last 12 months has fluctuated. It started at approximately $250 in October 2023, peaked at around $300 in March 2024, and has settled at $284.85 as of September 30, 2024.
Dividend Yield and Payout Ratios
The company increased its quarterly dividend to $1.10 per share in February 2024. Based on a stock price of $284.85, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = ($1.10 4) / $284.85 ≈ 1.54%
The payout ratio is calculated as:
Payout Ratio = Dividends / Net Income = $188.5 million / $769.9 million ≈ 24.5%
Analyst Consensus on Stock Valuation
As of October 2024, analysts have a consensus rating of Hold on the stock, with a price target range between $270 and $300.
| Metric | Value |
|---|---|
| P/E Ratio | 21.0 |
| P/B Ratio | 4.56 |
| EV/EBITDA Ratio | 7.21 |
| Stock Price (as of Sep 30, 2024) | $284.85 |
| Dividend per Share | $1.10 |
| Dividend Yield | 1.54% |
| Payout Ratio | 24.5% |
| Analyst Consensus | Hold |
Key Risks Facing Reliance Steel & Aluminum Co. (RS)
Key Risks Facing Reliance Steel & Aluminum Co.
Overview of Internal and External Risks
Reliance Steel & Aluminum Co. faces various risks that could impact its financial health. Key risks include:
- Industry competition, with increasing pricing pressure due to fluctuating metals prices.
- Regulatory changes affecting operational costs and compliance requirements.
- Market conditions influenced by economic downturns, impacting demand in key sectors.
Operational Risks
Operationally, the company has reported challenges due to:
- Declining metals prices that have affected gross profit margins, which were reported at 29.4% and 30.1% for the third quarter and nine months ended September 30, 2024, respectively, compared to 29.7% and 30.7% for the same periods in 2023.
- Increased costs from wage inflation and higher headcounts related to organic growth activities.
Financial Risks
Financially, the company faces risks such as:
- Lower net income, which decreased to $772.0 million for the nine months ended September 30, 2024, down from $1,066.7 million in 2023.
- A reduction in earnings per diluted share to $13.55 for the nine months ended September 30, 2024, from $17.92 in 2023.
Strategic Risks
Strategically, the company is focused on growth through acquisitions, having completed four acquisitions in 2024 for a total of $366.7 million. However, these acquisitions could pose integration risks and affect financial performance if not managed effectively.
Mitigation Strategies
To mitigate these risks, the company employs several strategies:
- Effective inventory management to handle fluctuations in metals pricing and maintain gross profit.
- Focus on orders with quick turnaround and value-added processing to enhance profitability.
- Utilization of a revolving credit facility of $1.5 billion to ensure liquidity.
Financial Overview
As of September 30, 2024, the company's financial position includes:
- Cash and cash equivalents of $314.6 million
- Net cash provided by operations of $956.5 million, down from $1.15 billion in 2023.
- Total equity of $7,361.2 million, compared to $7,732.8 million in 2023.
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Net Income (9 months) | $772.0 million | $1,066.7 million | -27.6% |
| Earnings per Share (EPS) | $13.55 | $17.92 | -24.0% |
| Gross Profit Margin | 30.1% | 30.7% | -0.6% |
| Cash and Cash Equivalents | $314.6 million | $1,080.2 million | -70.9% |
Future Growth Prospects for Reliance Steel & Aluminum Co. (RS)
Future Growth Prospects for Reliance Steel & Aluminum Co.
Analysis of Key Growth Drivers
Reliance Steel & Aluminum Co. is poised for growth through several strategic initiatives. The company completed four acquisitions in 2024 for a total of $366.7 million, enhancing its product breadth and processing capabilities. These acquisitions include:
- Cooksey Iron & Metal Company acquired on February 1, 2024, specializing in finished steel products.
- American Alloy Steel, Inc. acquired on April 1, 2024, focusing on specialty carbon and alloy steel.
- Mid-West Materials, Inc. also acquired on April 1, 2024, servicing North American OEMs.
- Assets from FerrouSouth acquired on August 16, 2024, enhancing flat-roll steel processing capabilities.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net sales reached $10.71 billion, down from $11.47 billion in the same period of 2023, reflecting a decrease of 6.6%. However, tons sold increased by 3.3% year-over-year, indicating underlying demand. Earnings per diluted share were $13.55 for the nine months ended September 30, 2024, compared to $17.92 in 2023.
| Metric | 2024 (YTD) | 2023 (YTD) | Change (%) |
|---|---|---|---|
| Net Sales | $10.71 billion | $11.47 billion | -6.6% |
| Tons Sold | 4,568.9 thousand | 4,425.0 thousand | +3.3% |
| Earnings per Diluted Share | $13.55 | $17.92 | -24.7% |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company’s focus on organic growth included capital expenditures of $319.7 million for the nine months ended September 30, 2024, aimed at enhancing operational efficiency and expanding production capabilities. Additionally, the company has a revolving credit facility of $1.5 billion, providing liquidity for further investments and strategic initiatives.
Competitive Advantages That Position the Company for Growth
Reliance Steel & Aluminum Co. maintains a strong market position due to its diversified product offerings and geographic reach. The company reported a gross profit margin of 30.1% for the nine months ended September 30, 2024, despite a decline in metals pricing. Effective inventory management and a focus on value-added processing have helped mitigate the impact of lower selling prices on profitability.
The company’s return to stockholders in the nine months ended September 30, 2024, totaled $1.14 billion, comprising $951.3 million in share repurchases and $188.5 million in cash dividends, indicating a commitment to returning value to shareholders while pursuing growth opportunities.
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Article updated on 8 Nov 2024
Resources:
- Reliance Steel & Aluminum Co. (RS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Reliance Steel & Aluminum Co. (RS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Reliance Steel & Aluminum Co. (RS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.