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RI

RELIANCE, INC. (RS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $3.13B, down 8.6% sequentially and 6.3% year-over-year; GAAP EPS was $1.93 and non-GAAP EPS $2.22, below the prior quarter due to an unfavorable year-end LIFO and tax true-up impact of $0.74 per share; FIFO gross margin improved to 28.8% despite pricing pressure .
  • Tons sold fell 5.1% q/q (better than guidance of down 6–8%) and rose 6.7% y/y; average selling price per ton declined 3.4% q/q; underlying operating performance was stronger than anticipated excluding non-recurring items and year-end LIFO/income tax adjustments .
  • Management guided Q1 2025 non-GAAP EPS to $3.30–$3.50 with tons sold up 6–8% q/q, ASP roughly flat (-1% to +1%), and FIFO gross margin improving; dividend was raised 9.1% to $1.20/share, with $1.15B remaining for buybacks as of Feb 18, 2025 .
  • LIFO income for full-year 2025 is estimated at ~$60M, reflecting timing shifts from receipt of long lead-time specialty stainless and alloy products; this is not an expectation of declining 2025 metals pricing and normalizes from 2024’s $144.4M LIFO income (originally guided at $200M) .
  • Street consensus estimates from S&P Global were unavailable due to API limits; we cannot quantify beats/misses vs Wall Street for Q4 2024 in this report (S&P Global consensus data unavailable).

What Went Well and What Went Wrong

  • What Went Well

    • FIFO gross margin improved sequentially to 28.8% (from 27.9% in Q3), driven by better alignment of replacement costs with inventory on hand and strong pricing discipline; underlying operating results were stronger than anticipated excluding LIFO/tax true-up .
    • Shipments outperformed expectations: tons sold down 5.1% q/q versus guidance of down 6–8%, and up 6.7% y/y; same-store tons up 2.8% y/y; nonresidential construction, industrial machinery, military, shipbuilding, rail and automotive tolling supported demand .
    • Strong capital returns and liquidity: $473.3M cash from operations in Q4 and $1.43B for 2024 (third highest ever); $1.09B buybacks in 2024 (shares down 6%), dividend increased to $1.20/share; net debt/EBITDA 0.6x with significant capacity for continued deployment .

  • What Went Wrong

    • GAAP EPS ($1.93) and non-GAAP EPS ($2.22) were pressured by a year-end LIFO expense ($5.6M vs previously-estimated Q4 LIFO income) and income tax true-up; 2024 annual LIFO income finalized at $144.4M versus original $200M estimate .
    • Pricing pressure persisted in carbon steel; ASP/ton fell 3.4% q/q and 12.0% y/y; LIFO gross margin declined to 28.3% (from 29.4% in Q3) .
    • Semiconductor end-market demand remained under pressure due to excess supply chain inventories; specialty stainless/alloy deliveries with long lead times created LIFO timing effects that reduced Q4 income and pushed benefits into 2025 .

Financial Results

MetricQ4 2023 (oldest)Q2 2024Q3 2024Q4 2024 (newest)
Net Sales ($MM)$3,337.3 $3,643.3 $3,420.3 $3,126.6
Gross Profit ($MM, LIFO)$1,021.6 $1,086.0 $1,006.3 $886.1
Gross Margin (%) LIFO30.6% 29.8% 29.4% 28.3%
Gross Margin (%) FIFO (Non-GAAP)28.8% 28.4% 27.9% 28.8%
Diluted EPS ($)$4.70 $4.67 $3.61 $1.93
Non-GAAP Diluted EPS ($)$4.73 $4.65 $3.64 $2.22
Tons Sold (000s)1,354.2 1,553.5 1,521.4 1,444.3
Avg Selling Price per Ton ($)$2,466 $2,348 $2,246 $2,170
LIFO Expense (Income) ($MM)$59.5 expense $(50.0) income $(50.0) income $5.6 expense

Segment/Commodity Sales Mix (Q4)

CommodityQ4 2023 Sales ($MM)Q3 2024 Sales ($MM)Q4 2024 Sales ($MM)
Carbon Steel$1,805.2 $1,856.2 $1,680.8
Aluminum$553.9 $576.3 $534.2
Stainless Steel$517.9 $513.9 $473.2
Alloy$152.3 $155.9 $143.1

Key KPIs

KPIQ4 2023Q3 2024Q4 2024
Cash from Operations ($MM)$525.6 $463.9 $473.3
Free Cash Flow ($MM)$415.4 $351.1 $362.4
Net Debt/EBITDA (x)0.6x (FY basis) 0.6x (TTM) 0.6x (FY)
Net Debt/Total Capital (%)0.8% (FY 2023) 11.5% 10.2%
% Orders Value-Added Processing—51% 50%
Share Repurchases ($MM)$240.3 $432.0 $142.4
Capital Expenditures ($MM)$110.2 $112.8 $110.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Tons Sold (q/q)Q4 2024Down 6% to 8% vs Q3 2024 Actual: down 5.1% vs Q3 2024 Outperformed guidance (better than expected)
ASP per Ton (q/q)Q4 2024Down 1.5% to 3.5% vs Q3 2024 Actual: down 3.4% vs Q3 2024 In line with guidance
Non-GAAP EPSQ4 2024$2.65–$2.85 Actual: $2.22 (unfavorable LIFO/tax true-up) Miss vs guidance (true-up impact)
Tons Sold (q/q)Q1 2025—Up 6% to 8% vs Q4 2024 New guidance
ASP per Ton (q/q)Q1 2025—-1% to +1% vs Q4 2024 New guidance
FIFO Gross MarginQ4 2024/Q1 2025Stabilize in Q4 2024 Improve in Q1 2025 Raised (sequential trajectory)
Non-GAAP EPSQ1 2025—$3.30–$3.50 New guidance
Dividend per ShareQ1 2025$1.10 (Q3 2024 declaration) $1.20 (declared Feb 18, 2025) Raised 9.1%
LIFO Income (Full-Year)2024/20252024 est. $200M → actual $144.4M 2025 est. ~$60M Lower (timing normalization)
Capex Cash Outlay2025—$375–$400M (budget $325M) New guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Tariffs/Trade PolicyHeightened macro/policy uncertainty; Q4 outlook guided conservatively due to policy uncertainty Potential March tariffs: some pull-forward, expect pricing upside historically; 95–96% domestically sourced mitigates disruption Increasing relevance; cautiously positive for pricing
Non-Residential ConstructionStable/improving; projects across data centers, energy infrastructure, public works Healthy levels expected in Q1 2025; strong demand persists Improving/steady
Value-Added ProcessingInvestments support margins; ~50% of orders include processing in 2023 ~50% of 2024 orders included processing; plan to grow with general manufacturing Stable to growing
AerospaceStable commercial; strong defense/space Commercial stable; defense/space strong; specialty stainless/alloy timing affected LIFO Stable; inventory normalization expected
Automotive TollingImproved demand; stable outlook Processed tons up; demand expected stable Improving/stable
SemiconductorUnder pressure due to excess inventory Still under pressure; infrastructure build choppy across sites Weak near-term; long-term constructive
Pricing EnvironmentCarbon steel pressure; ASP guided down; gross margin under pressure ASP down 3.4% q/q; FIFO margin improved; cautious Q1 pricing (flat) Stabilizing ex-carbon; margin management effective
Capital AllocationReplenished $1.5B buyback; robust acquisitions $203M YTD 2025 repurchases; $1.15B remaining authorization; $375–$400M 2025 capex outlay Ongoing strong deployment

Management Commentary

  • “Our businesses demonstrated resilience in 2024… we grew our same-store volumes well above industry shipment levels, bolstering our earnings in a declining metals pricing environment… delivering a strong full year gross profit margin of 29.7% — solidly within our sustainable annual range.” — Karla Lewis, President & CEO .
  • “On a non-GAAP FIFO basis… our gross profit margin improved sequentially from 27.9% in the third quarter to 28.8% in the fourth quarter, reflecting better alignment of replacement costs and our inventory on hand.” — Arthur Ajemyan, CFO .
  • “Coming into 2025, our January activity was pretty strong… with impending tariffs in March, we have seen a little bit of customer activity trying to make sure that they get their material before the price increases.” — Stephen Koch, EVP & COO .
  • “We estimate LIFO income of approximately $60 million [for 2025]… reflecting the carryover and normalization of specialty stainless steel product inventory from 2024 rather than an expectation of declining metals pricing.” — Arthur Ajemyan, CFO .

Q&A Highlights

  • Demand and tariffs: Management sees steady demand with some pull-forward ahead of potential tariffs; expects historical pricing uplift if imports are curtailed; domestic sourcing (~95–96%) limits cross-border exposure .
  • Pricing and guidance conservatism: Q1 ASP guided flat; any tariff-driven price changes are not baked into guidance, implying potential upside if price hikes stick .
  • Working capital seasonality: Expect typical build in Q1/Q2 and release in Q3/Q4; inventory days to follow historical patterns .
  • LIFO dynamics: Longer lead times in specialty stainless/alloy created a lag, pushing LIFO income from 2024 into 2025; expect less of that material by end-2025 as aerospace build rates normalize .
  • Cost structure and capex: Operating cost per ton held roughly steady ($40–$50); 2025 capex cash outlay projected at $375–$400M (budget $325M), focusing on growth and processing capacity .

Estimates Context

  • Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to API limits; consequently, we cannot quantify the magnitude of beats/misses vs Wall Street for this quarter in this report (S&P Global consensus data unavailable).

Key Takeaways for Investors

  • FIFO margin trajectory and cost alignment improved in Q4 and are guided to continue improving in Q1, a positive for near-term earnings quality despite carbon steel price pressure .
  • The LIFO timing headwind that reduced Q4 earnings should reverse in 2025 (estimated ~$60M LIFO income), with inventory normalization expected as specialty stainless/alloy deliveries and aerospace build rates align, supporting FY 2025 EPS visibility .
  • Nonresidential construction, industrial/military/rail, and automotive tolling remain healthy; semiconductor is the key soft spot, but long-term structurally supported by U.S. fab build-out (albeit choppy) .
  • Strong cash generation and balance sheet (net debt/EBITDA 0.6x) underpin robust capital returns: dividend raised to $1.20/share and $1.15B remaining buyback capacity; continued capex to expand value-added processing supports margin defense .
  • Near-term trading catalyst: potential tariff decisions and follow-on price hikes; management’s conservative Q1 pricing guide leaves room for upside if announced increases hold, while shipment seasonality (+6–8% q/q) provides volume support .
  • Medium-term thesis: Diverse end-market exposure and value-added processing (~50% of orders) should sustain premium margins through cycles; acquisitions and processing investments augment scale and pricing discipline, supporting multi-year FCF and returns .

Notes: All data sourced from company 8‑K press releases and Q4 2024 earnings call. Wall Street consensus data from S&P Global was unavailable due to API limits for this report.