Reliance Steel & Aluminum Co. shares rose Tuesday to a 52-week high on prospects for strong metals prices, benefits of a recently announced acquisition and the result of higher earnings guidance.
On Tuesday, Reliance cited larger and faster-than-expected increases in carbon steel product prices. It said it now expects to post a profit of $2 to $2.10 per share, up from its previous prediction of $1.50 to $1.60 per share.
Analysts polled by Thomson Financial expect a profit of $1.64 per share for the period, on average.
Shares rose as high as $78.31 before falling back to $73.75, up 27 cents, in afternoon trading.
Early last week, the Los Angeles-based company agreed to buy PNA Group Holding Corp., a steel service center group owned by Platinum Equity, for about $1.1 billion. Service centers buy metal from mills, maintain inventories of metal and process the metal for customers.
KeyBanc Capital Markets analyst Mark Parr, writing Friday in a client note, increased his 2009 earnings estimate to $7.75 per share from $7.10 per share. Analysts polled by Thomson Financial expect, on average, earnings per share of $6.57.
Parr said his earnings revision came on "a very solid strategic and accretive acquisition in PNA, which offers (Reliance) increased exposure into carbon structural and plate steel processing and distribution and carbon flat-rolled, as well as logistics synergies."
The analyst also wrote that Reliance shares remain attractive, given a track record of "excellent working capital management and execution, despite tightening credit conditions and a low-growth domestic economy."
Parr has a "Buy" rating on the shares and raised his price target to $90 from $80.
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