RUSSEL METALS $30.34 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 61.0 million; Market cap: $1.9 billion; Dividend yield: 4.4%) is one of North America’s largest metal distributors. It serves 39,000 clients at 53 locations in Canada and 12 in the U.S.
In the quarter ended December 31, 2013, Russel’s revenue rose 5.9%, to $811.1 million from $765.9 million a year earlier. Sales at the company’s metalservices business rose 4%, as higher demand offset lower selling prices. The energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 12%.
Earnings gained 13.4%, to $22.8 million from $20.1 million. Per-share earnings rose 8.8%, to $0.37 from $0.34, on more shares outstanding.
Russel holds cash of $116.2 million, or $2.64 a share. The company’s long-term debt of $457.2 million is a reasonable 25.0% of its market cap. The stock yields 4.6%.
In December 2013, the company bought Monarch Supply, an oilfield services firm that mainly operates in Alberta’s Drayton Valley area, for $33 million. Monarch’s annual sales are about $50 million.
Customers in the oil and gas industry supply about 35% of Russel’s revenue. 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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