UPDATE: Reliance Steel (RS) Tops Q1 EPS by 35c, Revenues Miss; Will Not Provide 2Q Guidance Due to COVID-19 Pandemic

(Updated - April 23, 2020 6:53 AM EDT)

Reliance Steel (NYSE: RS) reported Q1 EPS of $2.45, $0.35 better than the analyst estimate of $2.10. Revenue for the quarter came in at $2.57 billion versus the consensus estimate of $2.66 billion.

• Strong gross profit margin of 30.3%;
• non-GAAP gross profit margin of 31.9%
• EPS of $0.92, non-GAAP EPS of $2.45
  • Includes pretax impairment and restructuring charge of $137.5 million, or $1.53 per diluted share
• Generated cash flow from operations of $170.8 million, an increase of 45.7% year-over-year
• Repurchased $300.0 million of Reliance common stockMaintains quarterly dividend of $0.625 per share

Management Commentary

“We had a strong start to the year following several financial performance records in 2019,” said Jim Hoffman, President and Chief Executive Officer of Reliance. “Overall demand levels were healthy through most of the first quarter of 2020. Our strong non-GAAP gross profit margin of 31.9% was above our estimated sustainable range of 28% to 30% and produced non-GAAP gross profit dollars of $820.5 million on net sales of $2.57 billion, and non-GAAP pretax income of $220.6 million. Our non-GAAP earnings per diluted share of $2.45 significantly exceeded our first quarter guidance.”

Mr. Hoffman continued, “Our thoughts go out to everyone around the world fighting the COVID-19 pandemic, and especially those on the front-lines helping the people who are directly impacted. Most of our locations continue to operate albeit at reduced levels as essential businesses under the United States Department of Homeland Security Cybersecurity and Infrastructure Security Agency guidance. The health, safety and wellbeing of our employees is our most important core value at Reliance. We have taken stringent actions to implement social distancing and improved sanitation measures in the workplace to comply with heightened safety standards. We continue to work closely with our suppliers to maintain our strong partnerships to withstand these challenging circumstances. We are engaged with and listening to our customers and adapting to address and support their needs through this uncertain and difficult time. Importantly, many of our companies are supporting customers on mission critical projects to aid in the COVID-19 response around the country.”

Mr. Hoffman concluded, “We have taken difficult but appropriate actions in response to the COVID-19 pandemic, including workforce reductions, to right-size our operations to sustainable levels. We believe this will allow us to emerge from this current crisis intact, prepared and positioned to face new business realities, including the ability to quickly ramp up with our customers and suppliers, and to recall laid off employees when the time comes. Although the current situation is unlike anything we have experienced, we believe the resilience of our business model will help us manage through this particularly challenging time just as it has in the past. As we look to the future, we believe our diversification strategy and our focus on higher margin business and value-added processing will help support us through the recovery that will follow this crisis. Our strong balance sheet and counter-cyclical cash flow enable us to continue operating our business today, preserve jobs for the majority of our employees, help support future customer demand, and strategically partner with our key suppliers once this situation stabilizes. We believe that we are well positioned to emerge from this situation as a stronger and more innovative company.”

Business Outlook

Due to the macroeconomic uncertainty stemming from the coronavirus pandemic and overall lack of visibility into future demand trends, metal pricing and market conditions in the end markets in which Reliance operates, the Company will not provide guidance for the second quarter ending June 30, 2020 at this time.

For earnings history and earnings-related data on Reliance Steel (RS) click here.

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