Reliance Steel & Aluminum Co.

Reliance Steel & Aluminum had a mixed financial performance in the last quarter of 2022 and missed out on meeting the revenue expectations of Wall Street given the ongoing volatility in metal prices and general economic uncertainty. The company did manage an earnings beat with its performance being fueled by sustained aerospace and semiconductor sales, broad manufacturing demand, and non-residential development. Its net sales reached $17 billion for the year because of strong demand in the bulk of its end markets and attractive metals pricing. Throughout the fourth quarter, prices fell for the majority of carbon steel, stainless steel, and aluminum products sold. However, the aerospace, semiconductor, and energy businesses continued to see robust demand for higher-value goods, helping to offset negative pricing pressure on their average selling price. The overall demand for the larger manufacturing industries was comparable to last year’s levels. Despite some short-term difficulties entering 2023, semiconductor demand trended significantly above the fourth quarter of 2021. They also continue to invest in more capacity to support the enormous expansion of semiconductor production in the United States. Furthermore, the aerospace demand remained strong, with Reliance Steel’s exposure split nearly 50-50 between commercial and defense. In 2022, Commercial Aerospace experienced a significant upswing. Defense, space, and military industries also saw strong demand. We give Reliance Steel & Aluminum Co a ‘Hold’ rating with a revised target price.