Reliance Steel & Aluminum Co. (RS), the largest metals service company in US, reported net income of $41.8 million, or 57 cents per diluted share for the third quarter of 2009. This was considerably better than the Zacks Consensus Estimate of 45 cents and a sequential loss of 8 cents. However, earnings were down 72% from $152.5 million or $2.07 reported in the same quarter of the previous year on lower sales.  Earlier this month, Reliance Steel had updated its guidance for the quarter. The company was hoping for profits of 40 cents to 45 cents on improving gross margins. Gross margin for the quarter improved to 28.7% from 24.3% in the year-ago quarter. Profitability continued to improve materially as Reliance purged higher cost inventory. As this higher priced inventory is worked down, pricing improves and demand picks up, we anticipate a strong rebound in Reliance Steel’s ...

“Reliance Steel & Aluminum Co. [RS: 39.95, -0.05 (-0.12%)] is one of the largest metals service center companies in the United States. Though a network of more than 200 locations in 38 states, Belgium, Canada, China, Mexico, Singapore, South Korea and the United Kingdom, the Company provides value-added metals processing services and distributes a full line of more than 100,000 metal products. These products include galvanized, hot-rolled and cold-finished steel, stainless steel, aluminum, brass, copper, titanium and alloy steel sold to more than 125,000 customers in a broad range of industries. Some of these metal service centers provide processing services for specialty metals only.”

The challenge for Reliance, and all other metal service centers, is that lower demand for steel and aluminum is expected to continue through the first half of 2009. Perhaps, we will see the beginnings of a pick-up in demand by the end of the

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Reliance Steel & Aluminum Co. (RS) dropped nearly 4% in the afternoon session to trade below support at $32.69. The consensus estimate on the company's full-year earnings has fallen by 19 cents per share to $2.62 in the past week. RS is a Zacks#5 Rank ("Strong Sell") stock.

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