RUSSEL METALS $25.90 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 60.1 million; Market cap: $1.6 billion; Dividend yield: 5.4%) is one of North America’s largest metal distributors. The company serves its roughly 33,000 customers through a network of 51 locations in Canada and 12 in the U.S.
In the three months ended March 31, 2012, Russel’s revenue rose 22.1%, to $802.9 million from $657.7 million a year earlier. Revenue rose at all three of Russel’s divisions: The steel distribution division’s revenue rose 42% on higher sales volumes. Metal services revenue rose 18%, also on higher sales volumes. The energy tubular products division, which supplies pipes for oil and gas firms, saw its revenue rise 23%, because of increased drilling activity. Earnings per share were flat at $0.55 on steady steel prices.
Russel raised its quarterly dividend by 16.7% with the June 2012 payment, to $0.35 from $0.30. The stock now yields 5.4%. The company holds cash of $160.3 million, or $2.67 share. Its $294.6 million of long-term debt is a reasonable 18.9% of its market cap.
Russel gets about 30% of its revenue from customers in the oil and gas drilling industry. That, plus its exposure to fluctuating steel prices, adds risk. However, the company’s long-term outlook remains positive, and it is well positioned to gain as the economy recovers.
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