Benzinga | Jul 22, 2021 01:51PM EDT

Reliance Steel & Aluminum Tops Q2 Earnings; Expects Supply Constraints To Continue In Q3

* Reliance Steel & Aluminum Co (NYSE:RS) reported second-quarter net sales growth of 69.3% year-over-year and 20.4% sequentially to $3.42 billion, beating analysts consensus of $3.14 billion.

* Adjusted EPS improved to $5.06 from $1.36 last year, beating consensus estimates of $4.73.

* Sales by commodities: Carbon steel $2.09 billion (+95.4% Y/Y); Aluminum $498.8 million (+26.8% YY); Stainless steel $539.5 million (+60.4% Y/Y); and Alloy $134.9 million (+35% Y/Y).

* The gross margin improved by 130 bps to 31.7% compared to a year ago and declined 190 bps sequentially.

* The operating margin expanded by 760 bps to 13.5%.

* Tons sold increased 1% sequentially and 17.5% Y/Y, and the average selling price per ton sold was $ 2,418 (+43.8% Y/Y and +19.7% Q/Q), experienced strong demand trends in the majority of its end markets.

* Net cash generated by operating activities year-to-date was $263.4 million, compared to $646.5 million a year ago.

* The company closed the quarter with cash and cash equivalents of $727.6 million, versus $222.7 million at the end of Q2'20.

* Reliance Steel increased the existing share repurchase program to $1 billion, set to expire at the end of 2021.

* Reliance had total debt outstanding of $1.66 billion and a net debt-to-EBITDA ratio of 0.7x.

* Outlook: The company expects third-quarter non-GAAP EPS of $5.55 to $5.75, versus a consensus of $4.16.

* It estimates tons sold will be down 1% to up 1% sequentially and estimates average selling price per ton sold will be up 7% to 9%.

* It expects factors impacting shipment levels in Q2, such as metal supply constraints and supply chain disruptions, to continue to persist in Q3.

* Price Action: RS shares are down 1.13% at $149.13 on the last check Thursday.