Reliance Steel & Aluminum Shines With Record Q1

Reliance Steel & Aluminum ((RS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Reliance Steel & Aluminum struck an upbeat tone on its latest earnings call, as management highlighted record shipment volumes, firmer pricing and double‑digit growth in sales, margins and earnings. While acknowledging temporary headwinds from higher accounting charges and tariff-related distortions, executives emphasized strong execution, major contract wins and a balance sheet built to fund both growth and shareholder returns.

Revenue Growth and Top-Line Momentum

Sales increased 15% year over year in the first quarter of 2026, powered by a combination of higher tons shipped and improved pricing. Management framed the performance as broad-based across key end markets, underscoring the company’s ability to capture volume and price even in a mixed macro environment.

Record Volume and Industry Outperformance

Reliance reported record tons sold in Q1, with volumes up 9.4% sequentially and 2.7% versus a year ago. That performance outpaced the North American service center industry by about 8 percentage points, marking the 13th straight quarter of shipment outperformance versus peers.

Pricing Gains and ASP Improvement

Average selling price per ton climbed 5.3% from the prior quarter, adding incremental lift to revenue and profitability. Management noted that disciplined pricing and product mix helped sustain strong margins, even as they cautioned that price increases are unlikely to repeat at the same pace in Q2.

Strong Profitability and EPS Expansion

Non‑GAAP pretax income surged roughly 33% year over year to $354 million, with pretax margin improving 120 basis points to 8.8%. Non‑GAAP diluted EPS jumped nearly 37% to $5.16, reflecting both operating leverage and the impact of ongoing share repurchases.

Gross Profit Growth and Margin Expansion

Gross profit reached $1.2 billion, up 23% versus Q4 2025 and 13% versus the prior-year quarter, as higher prices and volumes flowed through the P&L. On a FIFO basis, gross profit margin expanded to 30.1% from 28.5% in Q4, remaining just a touch below last year’s 30.4% despite cost and tariff noise.

Major Government Contracts Boost Long-Term Visibility

The company highlighted two major government contract wins secured through AMI Metals, covering Department of Homeland Security border wall work and Joint Strike Fighter programs. Collectively described as having up to roughly $3 billion in potential revenue, the deals provide multi-year backlog and reinforce Reliance’s positioning in defense and infrastructure.

Capital Returns and Balance Sheet Firepower

Reliance lifted its annualized dividend rate by 4% to $5.00 per share and repurchased $234 million of stock in Q1, with about $529 million still authorized. Total debt stands at $1.7 billion and net debt-to-EBITDA near 1.0, giving the company ample flexibility to continue buybacks, dividends and bolt-on M&A.

Cash Flow, Inventory Discipline and Capex Plans

Operating cash flow was about $151 million in Q1, tempered by the usual seasonal working capital build early in the year. Inventory turns improved to roughly 5x from 4.9x, while the company invested $64 million in capital expenditures and reaffirmed full-year capex of around $300 million, with roughly half earmarked for strategic growth projects.

LIFO Expense Surprise and Outlook

Q1 LIFO expense came in at $37.5 million, above the company’s prior $25 million estimate, translating to about $0.54 per share versus a $0.36 assumption in earlier guidance. Reflecting recent metal cost moves, management raised its full-year LIFO outlook to $150 million from $100 million, framing the impact as accounting-related rather than a signal of weakening fundamentals.

Tariff-Driven Aluminum Margin Distortion

Management called out the 50% Section 232 tariffs on aluminum as a source of margin distortion, compressing percentage margins even as gross profit dollars on aluminum grew nearly 18% year over year. Tariffs and associated LIFO effects added “noise” to reported results, creating temporary pressure on reported margin metrics without undermining underlying profitability.

SG&A and Operating Cost Inflation

Non‑GAAP SG&A expenses increased 6% year over year, driven by higher incentive compensation, broader wage inflation and increased warehousing and delivery costs linked to higher activity levels. On a per‑ton basis, SG&A rose about 3%, which management indicated remains manageable given the strength in revenue and margins.

End-Market Pockets of Weakness

Commercial aerospace remains a soft spot, with customers still working through elevated inventories that temper demand near term. Management noted that semiconductor-related business is small but showing signs of improvement, while automotive exposure is modest at roughly 4% and largely toll processing, which is excluded from reported tons sold.

Mix Impact from DHS Contract on Margins

Executives flagged that the DHS border wall contract is likely to dilute consolidated gross margin percentage due to lower average selling prices for that product mix. However, they stressed that the contract should still be a solid earnings contributor thanks to efficient operations, scale benefits and relatively low operating costs.

Near-Term Price Normalization Risk

Reliance expects Q2 pricing to remain strong but not advance at the rapid pace seen in Q1, as higher-cost metal begins to flow through inventories and one-time margin tailwinds fade. Management framed this as a normalization rather than a downturn, with underlying demand and pricing trends still viewed as stable.

Macroeconomic and Geopolitical Overhangs

The company cautioned that its outlook remains sensitive to changes in domestic and international trade policy as well as geopolitical tensions, including conflict in the Middle East. These factors could affect metal supply chains, pricing and customer demand, though management believes its diversified footprint and balance sheet offer resilience.

Forward Guidance and Outlook

For the second quarter of 2026, Reliance guided to non‑GAAP diluted EPS of $5.15 to $5.35, implying about 16% to 21% year-over-year growth and incorporating an estimated $37.5 million LIFO charge. The company expects demand and pricing to be generally in line with Q1, reaffirmed roughly $300 million in 2026 capex and pointed to robust Q1 metrics as validation of its confidence despite trade and geopolitical risks.

Reliance Steel & Aluminum’s earnings call painted a picture of a company leveraging its scale, pricing power and government contract pipeline to deliver strong growth and shareholder returns. While accounting charges, tariffs and selective end-market softness may add volatility to quarterly results, management’s guidance and balance sheet suggest the core earnings story remains firmly intact.