Reliance, Inc. RS benefits from a diversified business model and product base, growth through strategic acquisitions and strong liquidity amid headwinds from pricing and demand weakness.

RS’ shares have gained 2.4% in the past year compared with the Zacks Mining – Miscellaneous industry’s 12.9% decline.

Image Source: Zacks Investment Research

Let’s find out why RS stock is worth retaining at the moment.

Acquisitions & Strong Liquidity Bode Well for RS Stock

Reliance gains on its resilient business model serving diverse end markets, strong execution and actions to drive growth through acquisitions. RS has been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. It has completed 76 acquisitions since its IPO in 1994, which have expanded its product diversification and value-added processing capabilities.

The acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals align with its strategy of investing in high-quality businesses. The buyout of Southern Steel Supply also expanded the company’s reach in the Southern United States and boosted its value-added processing services. The buyout of Cooksey Iron & Metal Co also boosts Reliance's presence in the fast-growing Southeastern market. The acquisition of American Alloy has expanded Reliance's product portfolio with specialty carbon steel plates as well as new production capabilities. 

In August 2024, RS completed the acquisition of FerrouSouth toll processing assets. The integration of FerrouSouth’s tolling operations enhances its toll processing capabilities and expands capacity for Feralloy’s existing operations in the Southeastern United States.

Reliance's strong liquidity position also allows it to drive shareholder value.  During the third quarter of 2024, the company returned $60.6 million to shareholders in cash dividends and repurchased shares worth $432 million. Its board, in October 2024, approved an amendment of its share repurchase plan, replenishing the buyback authorization to $1.5 billion. RS ended the third quarter with cash and cash equivalents of $314.6 million. It generated $463.9 million in cash flow from operations during the quarter, driven by solid profitability and prudent working capital management. 

RS, during the third quarter, entered into an amended and restated five-year unsecured revolving credit facility worth $1.5 billion. This amended and restated credit agreement not only strengthens its already strong liquidity position but also increases its ability to continue pursuing its capital allocation strategies.

Weak Pricing, Demand Headwinds Ail Reliance

Reliance continued to face pricing pressure in the third quarter. Its average selling price per ton sold declined around 12% year over year in the quarter. Weaker metals pricing hurt its sales and the bottom line in the quarter. Reliance expects its average selling price per ton sold to be down 1.5-3.5% sequentially in the fourth quarter due to continued pricing pressure across carbon steel products. Weaker prices are likely to weigh on its performance in the fourth quarter.

RS anticipates underlying demand to weaken across most of the end markets it serves in the fourth quarter factoring in the current significant uncertainty surrounding economic policy in the United States. RS expects its tons sold to be down 6-8% in the fourth quarter from the third quarter of 2024, considering normal seasonal trends and increased macroeconomic and political uncertainty.

Reliance, Inc. Price and Consensus

Reliance, Inc. price-consensus-chart | Reliance, Inc. Quote

RS’ Zacks Rank & Other Key Picks

RS currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are Sylvamo Corporation SLVM, Carpenter Technology Corporation CRS and ICL Group Ltd ICL. While SLVM sports a Zacks Rank #1 (Strong Buy), CRS and ICL carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sylvamo beat the consensus estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 16.7%, on average. SLVM’s shares have rallied roughly 65% over the past year. 

Carpenter Technology beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 14.1%. CRS’ shares have soared 214% in the past year. 

The Zacks Consensus Estimate for ICL Group’s current-year earnings has increased by 8.8% in the past 60 days. ICL beat the consensus estimate in each of the last four quarters with the average surprise being 18.1%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Reliance, Inc. (RS) : Free Stock Analysis Report

Carpenter Technology Corporation (CRS) : Free Stock Analysis Report

ICL Group Ltd. (ICL) : Free Stock Analysis Report

Sylvamo Corporation (SLVM) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research