Analysts Are Updating Their Reliance Steel & Aluminum Co. (NYSE:RS) Estimates After Its Third-Quarter Results
Reliance Steel & Aluminum Co. (NYSE:RS) came out with its third-quarter results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. The result was positive overall - although revenues of US$2.1b were in line with what the analysts predicted, Reliance Steel & Aluminum surprised by delivering a statutory profit of US$1.51 per share, modestly greater than expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
View our latest analysis for Reliance Steel & Aluminum
Following the latest results, Reliance Steel & Aluminum's four analysts are now forecasting revenues of US$9.50b in 2021. This would be a modest 4.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 21% to US$7.55. Before this earnings report, the analysts had been forecasting revenues of US$9.73b and earnings per share (EPS) of US$7.31 in 2021. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
The consensus has made no major changes to the price target of US$108, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Reliance Steel & Aluminum at US$123 per share, while the most bearish prices it at US$84.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We can infer from the latest estimates that forecasts expect a continuation of Reliance Steel & Aluminum'shistorical trends, as next year's 4.1% revenue growth is roughly in line with 4.1% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 8.2% per year. So it's pretty clear that Reliance Steel & Aluminum is expected to grow slower than similar companies in the same industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Reliance Steel & Aluminum following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$108, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Reliance Steel & Aluminum going out to 2022, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 1 warning sign for Reliance Steel & Aluminum that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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