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

RS’ shares have declined 9.1% in the past year compared with the Zacks Mining – Miscellaneous industry’s 6.9% decline.

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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. The company returned roughly $250 million to shareholders in cash dividends and repurchased a record $1.1 billion in shares in 2024. It raised its quarterly dividend by around 9% to $1.20 per share. RS ended 2024 with cash and cash equivalents of $318.1 million. It generated $1.43 billion in cash flow from operations during the year, aided by prudent working capital management and profitability.

Pricing Pressure, Demand Headwinds Ail Reliance

Reliance continued to face pricing pressure in the fourth 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. Despite some stabilization, the pricing pressure is likely to continue in the first quarter. Reliance is seeing pressure in carbon steel product prices. Weaker year-over-year pricing might adversely impact the company's revenues and profitability in the first quarter. Reliance expects its average selling price per ton sold to be down 1% to up 1% in the first quarter compared with the fourth quarter due to stabilization of prices.

Although the company is experiencing growth in several of its major markets, the semiconductor market remains a weak spot. Demand in the sector declined in the fourth quarter of 2024 compared with the prior-year quarter’s levels. Demand continues to be under pressure due to excess inventory in the supply chain.

Reliance, Inc. Price and Consensus

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

RS’s Zacks Rank & Other Key Picks

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

Better-ranked stocks in the Basic Materials space are Axalta Coating Systems Ltd. AXTA, Carpenter Technology Corporation CRS and Orla Mining Ltd. ORLA. While AXTA sports a Zacks Rank #1 (Strong Buy), CRS and ORLA carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Axalta Coating’s 2025 earnings is pegged at $2.51, indicating a rise of 6.8% from year-ago levels. AXTA beat the consensus estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 16.3%, on average. 

Carpenter Technology beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 15.7%. The company's shares have soared roughly 169% in the past year. 

The Zacks Consensus Estimate for Orla Mining’s 2025 earnings is pegged at 43 cents, indicating a rise of 80.6% from year-ago levels. The consensus estimate for ORLA’s 2025 earnings has increased by 30.3% in the past 60 days.

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

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This article originally published on Zacks Investment Research (zacks.com).

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