Reliance (RS) Q2 2024 earnings summary

Executive summary

• Net sales for Q2 2024 were $3.64 billion, with tons sold up 4% sequentially and 4.7% year-over-year, outperforming industry shipment levels.

• Gross profit margin was 29.8%, within the long-term sustainable range despite pricing headwinds, as carbon steel pricing declined more than anticipated, impacting EPS.

• EPS was $4.67 (non-GAAP $4.65), down sequentially and year-over-year due to lower carbon steel prices.

• Completed three acquisitions YTD, adding nearly $500 million in annualized net sales, and announced a fourth to expand toll processing capabilities.

• Significant capital returned to shareholders through $519.3 million in Q2 share repurchases and $62.6 million in dividends.

Financial highlights

• Q2 2024 non-GAAP diluted EPS was $4.65, down 12.3% sequentially; net income was $267.8 million, down 30.5% year-over-year.

• Gross profit margin decreased from 31% in Q1 to 29.8% in Q2, primarily due to lower metal prices.

• Operating cash flow was $366.3 million in Q2; free cash flow for H1 2024 was $285.7 million.

• SG&A expense as a percentage of sales increased to 18.3% in Q2 2024.

• Effective tax rate was 23.3% for Q2 and H1 2024.

Outlook and guidance

• Q3 2024 tons sold expected to decline 2.5%-4.5% sequentially but rise 4.5%-6.5% year-over-year, with 4% of growth from acquisitions.

• Average selling price per ton expected to decrease 2%-4% in Q3, mainly due to carbon steel pricing.

• Gross profit margin anticipated to remain under pressure in Q3; non-GAAP EPS guidance is $3.60-$3.80.

• Management expects continued healthy demand in most end markets but notes ongoing pressure from lower metals prices.

• Liquidity remains strong, with $350.8 million in cash and a $1.5 billion undrawn credit facility.