Analyst sees rising demand, profitability at Reliance Steel & Aluminum

HARTFORD, CONN. — Improving demand and increased profit should help boost share prices for Reliance Steel & Aluminum Co., an analyst said Thursday. Jefferies analyst Yvonne M. Varano said in a client note that demand "remains challenging." Still, customers of the Los Angeles company, which processes and sells products to aerospace, energy and construction companies, have depleted their inventories and are ready to resume orders, she said. Profitability at Reliance Steel has improved as it cut higher-cost inventory, taking nearly $1 billion out of inventory over the last nine months, Varano said. As a result, pricing and demand will improve, with a "strong rebound in profitability" expected, she said. She cut her 2009 earnings estimate to 91 cents per share from $1 per share on a "slightly more conservative revenue forecast." Varano cut her third-quarter earnings estimate to 23 cents per share from 27 cents per share. The analyst maintained her $44 price target. Reliance Steel said Wednesday that its sales in July slipped 2.5 percent from the previous month.