Reliance, Inc. (RS) Earnings & Analysis

Latest quarter

Reliance reported third-quarter revenue of $5.2 billion, above the $4.7 billion consensus. Adjusted earnings per share, as counted by the consensus, were $8.02, above the $6.76 estimate.

Revenue rose from $3.7 billion a year earlier. Reliance’s filing attributed the increase to higher tons sold and selling prices: tons sold increased 16% and the average selling price per ton rose 24% year over year. The filing said demand improved across most end markets, including non-residential construction and broader manufacturing, while border wall shipments also contributed to volume growth.

Diluted earnings per share rose to $7.84 from $3.59. The filing attributed the increase to higher selling prices, operating leverage and the border wall project’s earnings contribution. Gross margin declined to 27.9% from 28.3%, while operating margin rose to 10.6% from 7.12%. The filing said higher carbon steel and aluminum costs increased LIFO expense, while higher volumes and prices more than offset increases in LIFO and selling, general and administrative expenses. Reliance reported free cash flow of $133.8 million, down from $181.5 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Karla Lewis said demand and tight supply had raised pricing for most carbon steel products. She credited Reliance’s processing capabilities, product diversification and ability to source inventory for customers. CFO Arthur Ajemyan said shipments and pricing exceeded the company’s expectations, while LIFO expense was also higher than anticipated.

Ajemyan said the border wall project reduced FIFO gross margin but added 40 basis points to pretax income margin because its operating costs per ton were below the company average. He said the project contributed 74 cents per share to non-GAAP earnings, above Reliance’s expectation of approximately 60 cents per share. On a question about operating leverage, he said higher selling prices and increased volumes through existing infrastructure both helped.

Asked about supply constraints, COO Steve Cook said carbon plate, hot-rolled coil and heat-treated aluminum plate were tight, but Reliance was getting the material it needed. Lewis said customer optimism and backlogs supported her demand outlook, adding: “Organic growth, though, could be tempered by supply availability.” She said Reliance expected to continue outpacing the industry despite tight supply.

On the border wall contract, Lewis said Reliance was executing the $1.45 billion first phase and expected to fulfill it sometime in the second quarter of 2027. She said the company had secured orders for over half of the estimated $800 million second phase, which was still in progress. Lewis said the project could run into early 2028 if the full second phase is executed.

Lewis maintained Reliance’s approximately $300 million full-year capital expenditure outlook, with about half allocated to strategic growth investments. For the fourth quarter, she said Reliance’s best estimate was generally normal seasonality, while customer holiday shutdowns remained uncertain.

Guidance

CFO Arthur Ajemyan raised Reliance’s full-year 2026 LIFO expense outlook to $450 million from $300 million. He said third-quarter LIFO expense included a year-to-date catch-up from the higher annual estimate, as carbon steel costs rose more than the company had anticipated.