Reliance Steel & Aluminum Signals Underlying Earnings Strength
Reliance Steel & Aluminum ((RS)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Reliance Steel & Aluminum’s latest earnings call struck a cautiously upbeat tone, with management emphasizing record shipment volumes, market share gains, and stronger FIFO profitability even as GAAP EPS declined under the weight of tariffs and heavy LIFO charges. Executives framed aluminum-related cost pressures and softness in certain end markets as temporary, stressing robust cash generation and balance sheet strength to support growth and shareholder returns.
Record Volumes and Market Share Expansion
Reliance posted a new shipment record in 2025, with tons shipped rising 6.2% to 6.4 million and U.S. market share climbing to about 17% from 15% a year earlier. Tolling tons also grew 1.2% to 7.4 million, signaling continued underlying demand and the company’s ability to win share in a competitive metals distribution landscape.
Improved FIFO Profitability and Earnings Power
On an underlying FIFO basis, profitability moved higher, with FIFO gross margin expanding by 90 basis points year over year. Non‑GAAP FIFO pretax income increased by $80 million versus 2024, and excluding LIFO impacts, non‑GAAP FIFO earnings per share rose 13.5%, highlighting strong operational leverage despite headline GAAP EPS pressure.
Robust Fourth‑Quarter Financial Performance
Fourth‑quarter results underscored that momentum, as non‑GAAP EPS reached $2.40, up 8% from the prior year’s quarter. Pretax income climbed about 28% year over year in Q4, driven by a roughly 6% increase in volumes and a similar 6% lift in average selling prices compared with the same period in 2024.
Strong Cash Generation and Shareholder Returns
Reliance generated $831 million of operating cash flow in 2025, providing ample fuel for capital deployment. The company returned $849 million to shareholders through dividends and buybacks, including $200 million of repurchases in Q4 at about $279 per share, trimming shares outstanding by roughly 4% for the year and leaving significant repurchase capacity.
Disciplined but Flexible Capital Spending
Management outlined a 2026 capital expenditure plan of $275 million, with total spending including carryover expected between $300 million and $325 million. Roughly half of that budget is earmarked for growth initiatives, and leaders stressed they can dial CapEx higher when attractive, profitable customer opportunities emerge.
Constructive Near‑Term Outlook for 2026
The company set a positive tone for early 2026, guiding first‑quarter tons sold to rise 5% to 7% over Q4 2025, with average selling prices up 3% to 5% sequentially. That backdrop supports forecast non‑GAAP EPS of $4.50 to $4.70 in Q1, implying year‑over‑year growth of about 19% to 25% even after incorporating an estimated $25 million LIFO expense.
Low Leverage and Ample Financial Flexibility
Reliance ended 2025 with total debt of $1.4 billion and net debt‑to‑EBITDA below 1, a conservative profile for a cyclical business. This balance sheet strength provides room to continue funding acquisitions, buybacks, dividends and capital projects without stretching leverage, positioning the company to be opportunistic across cycles.
Operational Execution and Cost Discipline
Management highlighted ongoing gains in safety performance, with an improved TRIR in 2025 reflecting cultural emphasis on safe operations. Same‑store SG&A per ton declined nearly 1% for the full year despite inflation in wages and delivery expenses, underscoring solid operating leverage and cost control at the branch level.
Tariff‑Driven Aluminum Costs and Elevated LIFO Burden
Tariff‑related aluminum cost spikes proved difficult to pass through fully, given ample supply and softer demand in some channels. As a result, full‑year LIFO expense reached $114 million, above expectations, pulling the non‑GAAP gross margin down to 28.8% and just below the 29% to 31% range management views as sustainable over time.
GAAP EPS Hit by LIFO and Tax Adjustments
These accounting and tax dynamics weighed on reported earnings, with full‑year 2025 diluted EPS falling 10.2% from 2024. LIFO and year‑end tax true‑ups combined to create a net unfavorable impact of $0.25 per share, and Q4 alone carried $39 million of LIFO expense, versus prior guidance assumptions, cutting reported EPS by an estimated $0.56 in the quarter.
End‑Market Softness in Aerospace and Semiconductors
Not all sectors were strong, as commercial aerospace and semiconductor demand remained under pressure amid elevated supply chain inventories and excess chip stock. Management estimated that these two verticals together shaved more than 50 basis points from consolidated margins, but they expect both areas to begin recovering later in 2026 as inventories normalize.
Seasonal Volume Dip in the Fourth Quarter
Sequentially, Q4 tons sold declined 5.4% from Q3 2025, reflecting typical seasonality and some near‑term demand variability. Even so, volumes were 5.8% higher than in the year‑ago quarter, suggesting that underlying customer activity remains solid when adjusted for seasonal patterns.
Inflationary Pressures on SG&A Spending
Operating expenses did move higher in absolute terms, with same‑store non‑GAAP SG&A rising 6.7% in Q4 and 4.4% for the full year compared with 2024. The increase stemmed from wage inflation, higher warehousing and delivery costs, and greater incentive compensation, and Q4 SG&A per ton ticked up about 1.2% sequentially.
Aluminum’s Outsized Role in LIFO Distortion
Aluminum’s impact on LIFO accounting was disproportionate, as it represented only about 15% of sales but accounted for more than half of the company’s 2025 LIFO expense. This mismatch created a notable gap between strong FIFO operating performance and weaker LIFO‑based reported margins, reinforcing management’s view that the pressure is largely accounting‑driven and temporary.
Guidance and Outlook for 2026
Looking ahead, Reliance expects Q1 2026 non‑GAAP EPS between $4.50 and $4.70, with tons sold up mid‑single digits sequentially and pricing improving low‑to‑mid single digits from Q4. Management reaffirmed a 29% to 31% gross‑margin target, projected 2026 LIFO expense at about $100 million, and plans $300 million to $325 million of total CapEx while maintaining low leverage and strong capital returns.
Reliance Steel & Aluminum’s call painted a picture of a company executing well operationally, gaining share, and expanding underlying margins even as accounting headwinds weighed on GAAP results. With a healthy balance sheet, solid cash flow and constructive guidance for early 2026, management appears confident that tariff and end‑market pressures will ease, leaving the business positioned for improved earnings and continued shareholder rewards.
