Russel Metals Inc T.RUS

Alternate Symbol(s): RUSMF

Industrials Industrial Distribution

Russel Metals Inc. is a metals distribution company in North America with a growing focus on value-added processing. It carries on business in three segments: metals service centers, energy products and steel distributors. The Company’s network of metals service centers carries a line of metal products in a range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tubular products, stainless steel and aluminum, and other non-ferrous specialty metals. Its energy field stores carry a specialized product line focused on the needs of energy industry customers. Its steel distributors operations act as master distributors selling steel in large volumes to other steel service centers and large equipment manufacturers. It provides processing and distribution services to a base of approximately 35,000 end users through a network of 45 Canadian locations and 23 United States locations.

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Russel Metals Inc

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Post by ace1mccoyon Mar 16, 2022 8:30am

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Post# 34517709

Stifel Sets a BUY Rating & TP -G&M

Russel Metals Inc. (

RUS-T

-0.49%

) is poised to “benefit meaningfully” from a recent run up in hot rolled coil prices, said Stifel analyst Ian Gillies.

Upon resuming coverage, he called the Mississauga-based company “well run” with a “sound operational strategy.”

“The company just exited what can best be described as an amazing year,” he said. “The 2022 outlook is very healthy and has improved considerably over the prior four weeks due to higher commodity prices. The company should be able to use its significant cash generation profile to execute more M&A.”

Mr. Gillies thinks its 2021 profit may prove to be “a peak,” however he sees Russel’s outlook remaining “well above the trend line.” Noting product prices have tapered, making year-over-year’ comparables “challenging” in 2022, he’s projecting 2022 EBITDA and earnings per share of $475-million and $4.71, well above the average from 2015-2019 of $181-million and $1.48.

“The last month has seen a dramatic 56-per-cent increase in the 2022 HRC strip,” he said. “As a result, our 2022 EBITDA and EPS are 34 per cent/50 per cent above consensus while 2023 EBITDA and EPS are 19 per cent/33 per cent above consensus.”

“Cash deployment will be a catalyst to move the stock higher. We estimate that RUS will exit 2022 and 2023 with cash positions of $353-million and $782-million. This will give the company ample opportunity to do more acquisitions like Boyd Metals. We think the company will continue to expand its presence in the U.S., given it only holds 3-per-cent market share in that country compared to roughly 20 per cent in Canada.”

Mr. Gillies set a “buy” rating and $36 target. The current average on the Street is $39.

“We rate Russel Metals as BUY given its positioning to benefit from elevated HRC and plate prices in North America,” he said. “The company’s Energy Products segment should also see improvements given the recovery being experienced in the North American energy sector. The company’s significant cash position should also allow it to execute an active M&A strategy. Lastly, the company’s current P/Book of 1.2 times is typically an attractive entry point in the context of forward 12-month returns.”