Reliance (NYSE:RS) executives said the company began 2026 with stronger-than-expected first-quarter volume, pricing and earnings, citing tight supply conditions, improving demand and continued market share gains across a diversified end-market portfolio.
Record shipments and pricing drive earnings growth
President and CEO Karla Lewis said first-quarter “volumes, pricing, and earnings exceed[ed] our expectations,” with strong demand and pricing momentum building through the quarter. Lewis noted that first-quarter tons sold were a record and increased both sequentially and year-over-year, despite what she described as “unusually strong tariff-driven demand pull forward” in the prior-year period. She said the company outperformed broader industry shipments for the 13th consecutive quarter.
Cook also said average selling price increased 5.3% sequentially, exceeding the company’s expectation of 3% to 5%, as carbon steel, aluminum and stainless pricing rose “amid tight supply, extending lead times, and improving demand conditions.” Lewis said the company converted a 15% increase in sales into operating leverage, resulting in more than 30% year-over-year growth in non-GAAP pre-tax income and nearly 37% year-over-year growth in non-GAAP EPS to $5.16.
Government contracts highlighted, with border wall shipments starting in April
Management highlighted two government-related contract wins announced during the quarter through AMI Metals, a wholly owned subsidiary. Lewis said Reliance secured contracts to supply the Department of Homeland Security border wall project and Joint Strike Fighter programs, which “collectively represent up to approximately $3 billion in revenue.” She emphasized the first-quarter results did not include contributions from the border wall contract.
During the Q&A, Lewis said shipments for the border wall project began in April and the program is in a startup “ramp-up phase.” She said Reliance included its “current estimate of volume activity” from the contract in second-quarter guidance and expects activity to increase in the third quarter and beyond, though there is “not a committed shipment schedule.”
Lewis also addressed expected profitability dynamics, saying the border wall work will “bring our consolidated [gross profit margin] down a bit” based on product and service mix, but added it has “extremely low operating costs” that should help leverage expenses and contribute strongly to earnings.
Cook provided additional operational detail, saying “a majority of the products being shipped are hollow structural sections” and that the company is also processing sheet through a Texas facility, Feralloy. He said Reliance will ship from Texas and California and credited support from domestic mill suppliers in a supply-constrained market where “hot rolled coil is on limited availability.”
Later in the call, Lewis provided additional contract figures for the DHS project, saying the total is $2.2 billion, with phase one at $1.4 billion running through around the end of the second quarter of 2027.
Margins, tariffs, and LIFO: aluminum remains a key swing factor
CFO Arthur Ajemyan reported first-quarter gross profit of $1.2 billion, up 23% from the fourth quarter of 2025 and up 13% from the first quarter of 2025. On a FIFO basis, which Ajemyan said is how the company evaluates ongoing performance, non-GAAP FIFO gross profit margin was 30.1%, compared with 28.5% in the prior quarter and 30.4% a year earlier. Ajemyan said pricing discipline helped the company pass through higher mill pricing “on most products” and expand margins.
The company’s LIFO expense for the quarter totaled $37.5 million, above its $25 million estimate, driven by “higher-than-anticipated carbon steel and aluminum product cost increases,” according to Ajemyan. He said Reliance raised its full-year LIFO outlook to $150 million from $100 million and expects $37.5 million of LIFO expense again in the second quarter. Ajemyan added that LIFO expense per share was $0.54 in the quarter.
Management also discussed the effects of incremental Section 232 tariffs, with Ajemyan saying the 50% tariffs had the greatest impact on aluminum gross profit margin because pricing for common alloy aluminum products increased significantly “without a corresponding significant increase in demand.” Even so, he said aluminum gross profit dollars were up about 18% versus the first quarter of 2025.
Lewis told analysts Reliance has been able to push through the 50% tariff to customers more effectively than last year, but said the company is “not necessarily getting a full margin” on that tariff-related cost, pressuring aluminum margin percentage. She also described a “double hit on LIFO” from aluminum costs during periods with 50% tariffs. Ajemyan added that last year nearly half of LIFO expense related to aluminum; this year, he said, it is tracking at “a little less than half, maybe over a third.” Lewis reminded listeners that LIFO expense increases the LIFO reserve, which can reverse into income in future periods if prices decline.
End markets: strength in non-residential construction and manufacturing; aerospace mixed
Cook said non-residential construction represented roughly one-third of first-quarter sales, driven by carbon steel tubing, plate and structural products. He cited record-level demand tied to data center and related energy infrastructure projects, along with strength in heavy civil and public infrastructure work, offsetting lower activity in some private non-residential segments.
General manufacturing also accounted for about one-third of first-quarter sales, with Cook citing year-over-year shipment growth tied to industrial machinery (including data center equipment), shipbuilding, military programs, consumer products and construction machinery. Cook also said the company is “capturing rising nuclear-related demand” tied to small modular reactor programs and data center energy needs. In the Q&A, management pointed to the ISM Manufacturing Index being above 50 for three consecutive months and said that translated into increased activity in the first quarter.
Aerospace products made up approximately 10% of first-quarter sales, Cook said. He described commercial aerospace demand as “subdued” due to elevated inventories, though he expects gradual improvement in 2026 as OEMs work through backlogs and increase build rates. Cook said defense and space-related programs remained robust. Automotive represented 4% of sales, which Cook said is largely served through toll processing operations; those toll volumes are excluded from tons sold. He also said management is seeing “encouraging improvement” in semiconductor demand, with momentum building in 2026.
Capital allocation and outlook
Lewis said Reliance’s 2026 capital expenditure outlook is approximately $300 million, with “a little less than half” earmarked for strategic growth investments. She said the company raised its dividend 4% to an annualized $5 per share and repurchased $234 million of shares in the first quarter.
Ajemyan said first-quarter operating cash flow was approximately $151 million, reflecting a seasonal working capital build and higher metals pricing. He reported a five-times inventory turn rate (based on tons), up from 4.9 times a year earlier, and days sales outstanding of 42 days, consistent with the prior year. The company repurchased shares at an average price of $299 per share and had about $529 million remaining under its repurchase authorization. Total debt was $1.7 billion at March 31, and Ajemyan said net debt-to-EBITDA was about one.
For the second quarter, Ajemyan said Reliance expects demand and pricing “generally in line with Q1,” while noting risks tied to domestic and international trade policy and conflict in the Middle East. The company guided to second-quarter non-GAAP EPS of $5.15 to $5.35, including an estimated $37.5 million of LIFO expense, or about $0.54 per diluted share.
About Reliance (NYSE:RS)
Reliance Steel & Aluminum Co (NYSE: RS) is a leading metals service center company that distributes and processes a broad array of metal products. The company offers cut-to-length, shearing, blanking, sawing, bending, machining and value-added services for carbon and alloy steel, stainless steel, aluminum, brass, titanium and specialty metal alloys. Its products serve diverse end markets, including energy, infrastructure, general manufacturing, transportation, aerospace and defense.
Founded in 1939 in Los Angeles, Reliance Steel & Aluminum has grown through a combination of organic expansion and strategic acquisitions.
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