Reliance 4Q Outlook Weaker Than Expected

LOS ANGELES -- Reliance Steel & Aluminum Co. on Thursday predicted fourth-quarter income below analyst estimates, citing seasonal demand weakness, cautious customers and flat material costs. Reliance forecast fourth-quarter income of 95 cents to $1.05 per share, well below the $1.27 average estimate of analysts polled by Thomson Financial. Reliance's third-quarter profit margins declined due to lower prices for stainless steel products, Chief Executive David Hannah said in a statement. "We expect demand may soften further in the fourth quarter due to the normal seasonal holiday slowdown as well as cautious buying from our customers, leading us to anticipate relatively flat pricing," Hannah said. The guidance is weak, but "not too surprising," Goldman Sachs analyst Sal Tharani wrote in a note to clients Thursday. Tharani reiterated a "Buy" rating for the company, calling its long-term fundamentals intact. "This is a rough time for service centers, dealing with sharply falling pricing for some products and high inventory costs," he wrote. Tharani added that as metal mills push prices up, a "sluggish economy" will make it difficult for distributors like Reliance to pass on extra costs. Reliance shares rose $1.29, or 2.5 percent, to $52.69 in morning trading.