NEW YORK (TheStreet) -- Shares of Reliance Steel & Aluminum (RS) - Get Report are down by 1.98% to $58.50 at the start of trading on Tuesday morning, after a ratings downgrade to "sector-weight" from "overweight" at Keybanc.
The firm said it reduced its rating on the metal services center company as it believes Reliance Steel & Aluminum is leveraged to lower pricing forecasts.
"We see 75% of RS's book of business under greater NT pricing pressure than we previously envisioned in our mid-1Q upgrade and our margin inflection more delayed, including weaker 2Q FIFO results," Keybanc said in an analyst note.
"We remain neutral on the carbon steel sector largely via valuation. We see likelihood of a more prolonged shake-out in global iron ore, steel and nonferrous prices since early March balanced with modest near-term catalysts - potential U.S. sheet supply/demand balance, potential trade case(s) and /or a DOT infrastructure spending bill," the firm said.
Separately, TheStreet Ratings team rates RELIANCE STEEL & ALUMINUM CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate RELIANCE STEEL & ALUMINUM CO (RS) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 18.5%. Since the same quarter one year prior, revenues rose by 11.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 49.4% when compared to the same quarter one year prior, rising from $61.80 million to $92.30 million.
- Net operating cash flow has significantly increased by 60.59% to $193.20 million when compared to the same quarter last year. In addition, RELIANCE STEEL & ALUMINUM CO has also vastly surpassed the industry average cash flow growth rate of -51.60%.
- Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that RS's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.89 is high and demonstrates strong liquidity.
- You can view the full analysis from the report here: RS Ratings Report