Reliance Steel Announces Closure of Ferguson Acquisition

Reliance Steel & Aluminum Co. RS  acquired all the common stock of Ferguson Perforating Company through its fully-owned subsidiary, Diamond Manufacturing Company. The financial details and other terms of the transaction were however, not disclosed by the company. 

Ferguson specializes in manufacturing of highly engineered and complex perforated metal that has application in diverse end markets including industrial machinery, automotive, aerospace, sugar producers and consumer electronics manufacturers. The company recorded net sales of roughly $31 million for the year ended Dec 31, 2016.

According to Reliance Steel, Ferguson’s present CEO will retire upon the closure of the transaction but the management team will remain the same. Ferguson’s high value-added processing capabilities align well with the company’s inorganic growth strategy and also extend its product portfolio.

Shares of Reliance Steel have moved up 5.3% in the last three months, underperforming the industry’s 25.4% growth.

 

 

Reliance Steel posted a profit of $103 million or $1.40 per share in second-quarter 2017, up around 2.1% from $100.9 million or $1.38 recorded a year ago. Earnings per share topped the Zacks Consensus Estimate of $1.38.

Reliance Steel, in its second-quarter earnings call, noted that it expects earnings for the third quarter to be in the band of $1.15-$1.25 per share. The company expects tons sold will be down 3% to 5% in third-quarter 2017, compared with the previous quarter. Average selling price for the quarter is expected to be flat to up 3% from the second quarter.

Reliance Steel is likely to gain from the strong momentum across aerospace and automotive markets. It is also expected to benefit from aggressive acquisition strategy, broad and diversified product base and wide geographic footprint.

Reliance Steel & Aluminum Co. Price and Consensus

 

Reliance Steel & Aluminum Co. Price and Consensus | Reliance Steel & Aluminum Co. Quote

Zacks Rank & Stocks to Consider

Reliance Steel currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sociedad Quimica y Minera de Chile S.A. SQM, The Chemours Company CC and FMC Corporation FMC. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Sociedad Quimica has an expected long-term earnings growth rate of 32.5%.

Chemours has an expected long-term earnings growth rate of 15.5%.

FMC Corporation has an expected long-term earnings growth rate of 11.3%.

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