SCOTTSDALE, Ariz. - Reliance, Inc. (NYSE: RS), a major North American metals service center company, has announced the establishment of a $1.5 billion unsecured revolving credit facility, effective September 10, 2024. The five-year agreement is aimed at bolstering the company's liquidity and supporting its general corporate initiatives, including growth and stockholder return activities.
Karla Lewis, President and CEO of Reliance, expressed satisfaction with the terms of the new credit facility, noting improvements in the company's financial condition and credit ratings since the last renewal in 2020. These enhancements have reportedly enabled Reliance to negotiate more favorable pricing and less restrictive covenants. Lewis highlighted that the agreement not only reinforces the company's liquidity but also increases its capacity to pursue capital allocation priorities.
Bank of America N.A. serves as the Administrative Agent for the facility, with JPMorgan Chase (NYSE:JPM) Bank, N.A., and Wells Fargo Bank, National Association acting as Co-Syndication Agents. PNC Bank, National Association and the Toronto-Dominion Bank, New York Branch are Co-Documentation Agents. Additionally, BofA Securities, Inc., JPMorgan Chase Bank, N.A., and Wells Fargo Securities, LLC are joint lead arrangers and joint bookrunners, with PNC Capital Markets LLC and TD Securities (USA) LLC as joint lead arrangers.
Reliance, founded in 1939, has established itself as a leading provider of metal solutions and the largest metals service center in its region. The company operates over 320 locations across 41 states and 12 countries outside the United States, delivering a wide range of metal products and processing services to more than 125,000 customers in various industries.
In 2023, the average order size at Reliance was $3,210, with about 51% of orders including value-added processing and approximately 40% of orders delivered within 24 hours. The company's press releases and further information can be accessed through its website.
The statement from Reliance also contained forward-looking statements that involve risks and uncertainties, which could cause actual outcomes to differ from those projected. The company emphasizes that it does not undertake any obligation to update these statements publicly. These forward-looking statements, along with the company's risk factors, are detailed in its Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC.
This news article is based on a press release statement from Reliance, Inc.
In other recent news, Reliance Steel & Aluminum has been downgraded from Peer Perform to Underperform by Wolfe Research due to anticipated risks to margins and conservative steel price forecasts. The downgrade also reflects expectations for reduced free cash flow (FCF) and share buybacks in the coming years. The firm's analyst estimated EBITDA for Reliance Steel & Aluminum for the years 2024 and 2025 stands at $1.51 billion and $1.46 billion respectively, notably lower than consensus estimates.
Reliance Steel's valuation appears high, especially in the context of a slowdown in construction, with the company trading at 12 times Wolfe Research's estimated 2025 enterprise value to EBITDA (EV/EBITDA) ratio. The company's free cash flow is projected to decline to $800 million in 2025 from an expected $1.1 billion in 2024 and $1.2 billion in 2023. This anticipated decrease in free cash flow is seen as a potential challenge for the company to maintain its recent rate of more than $500 million in share buybacks.
In other recent developments, Reliance Steel reported mixed Q2 2024 results, marked by strategic growth through acquisitions amidst a challenging pricing environment. The company's non-GAAP diluted earnings per share for Q2 were slightly below the expected range. The company anticipates continued margin pressures in the upcoming third quarter due to stable demand but lower prices for carbon steel products.
InvestingPro Insights
Reliance, Inc. (NYSE: RS) has recently fortified its financial flexibility with a new $1.5 billion credit facility, reflecting the company's prudent financial management and strategic growth plans. InvestingPro data provides a snapshot of the company's current financial health and market performance, which may be of interest to investors considering the impact of this new development.
An analysis of Reliance's market capitalization reveals a solid standing at $15.29 billion, indicating the company's significant presence in the metals service industry. The Price/Earnings (P/E) ratio, a key metric for investors to evaluate a stock’s value, stands at 14.04, which adjusts to 13.43 when looking at the last twelve months as of Q2 2024. This suggests a reasonable valuation of the company's earnings. Moreover, the company's Gross Profit Margin for the same period is reported at 30.27%, highlighting its ability to maintain a healthy profit from its revenues.
InvestingPro Tips suggest that the company's PEG Ratio, which is currently at -0.6, may signal that the stock's price is undervalued based on its earnings growth potential. Additionally, with a Price to Book ratio of 2.01, Reliance appears to be trading at a fair value relative to its book value. For investors looking for more insights, there are additional InvestingPro Tips available, offering a deeper dive into Reliance's financial metrics and market potential.
Reliance's initiatives, such as the recently announced credit facility, are designed to support its operations and growth objectives. With the company's next earnings date scheduled for October 24, 2024, investors will be keenly awaiting further updates on its performance and strategic direction. As of the latest data, the company's fair value is estimated at $279.5 by InvestingPro, compared to analyst targets of $335, suggesting potential room for stock price growth.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.