Reliance (NYSE:RS) reported record quarterly net sales in the third quarter of 2026, supported by higher metal prices, increased shipment volumes and continued contributions from its U.S. Department of Homeland Security border wall contract.
President and Chief Executive Officer Karla Lewis said the company delivered its second-highest quarterly gross profit dollars and its third-highest quarterly earnings per share. Non-GAAP diluted earnings per share reached $8.02, up 120% from a year earlier and above the company’s prior guidance range of $6.40 to $6.60.
“Reliance capitalized on a favorable market environment characterized by continued healthy demand and tight supply,” Lewis said, pointing to increased pricing for most carbon steel products and the company’s relationships with domestic mills.
Sales, Shipments and Pricing Rise
Chief Operating Officer Steve Koch said third-quarter tons sold reached a company record, rising 4.3% sequentially despite typical seasonal patterns and material availability constraints. The border wall project accounted for 3.7% of that sequential increase.
Year-over-year tons sold increased 15.6%, exceeding the 10.1% industrywide increase reported by the Metals Service Center Institute, according to Koch. Carbon steel products led the shipment growth.
Average selling prices increased 8.2% from the second quarter, significantly above Reliance’s expectation for flat to 2% growth. Koch attributed the gain to constrained supplies, longer lead times and strengthening demand across commodities, especially carbon steel.
The company said non-residential construction and general manufacturing each represented roughly one-third of third-quarter sales. Non-residential construction demand was driven by data center and related energy infrastructure projects, heavy civil activity and public infrastructure. General manufacturing shipments grew on demand from industrial machinery, including data center equipment, shipbuilding, military equipment and construction machinery.
Aerospace accounted for about 8% of sales, while automotive represented approximately 4%. Reliance said commercial aerospace demand improved as original equipment manufacturer build rates and backlogs progressed, while defense and space-related activity remained strong. Semiconductor demand also strengthened meaningfully, supported by data center activity.
Border Wall Project Supports Earnings
The border wall contract made a $0.74-per-share contribution to third-quarter earnings, exceeding the company’s expectation of approximately $0.60 per share. The project reduced gross margin because of its product mix but added 40 basis points to pretax income margin due to its below-average operating cost per ton profile, Chief Financial Officer Arthur Ajemyan said.
Lewis said Reliance began shipping under the project in April and experienced a full-quarter ramp in the third quarter. She said the company believes shipments have reached a relatively steady flow, though the government’s subcontractors direct product releases.
The project’s first phase totals $1.45 billion in fully approved government funding. Lewis said Reliance expects to complete that phase sometime in the second quarter of 2027 at the current run rate. The company has also begun receiving bookings under a potential $800 million second phase and has already secured orders for more than half of that estimated amount. If fully executed, the second phase could extend into early 2028, management said.
Higher LIFO Expense Weighs on Margins
Third-quarter sales rose 43% from the prior-year period, aided by stronger shipments and pricing. Gross profit totaled $1.5 billion, up 12% sequentially and 41% year over year. Gross profit margin was 27.9%, down 20 basis points from the second quarter, reflecting higher-than-expected LIFO expense and the border wall project’s mix impact.
On a FIFO basis, non-GAAP gross profit margin expanded to 31.6%, compared with 30.5% in the second quarter and 29% a year earlier.
Reliance raised its full-year LIFO expense outlook to $450 million from $300 million. It recorded $187.5 million of LIFO expense in the third quarter, compared with its prior estimate of $75 million, due to a year-to-date catch-up effect tied to higher expected carbon steel costs. The company expects fourth-quarter LIFO expense of $112.5 million, or approximately $1.64 per diluted share.
Non-GAAP selling, general and administrative expense increased 18% year over year due to higher incentive compensation, inflation in employee-related costs, freight and fuel inflation, and higher warehousing and delivery expenses tied to volumes. However, SG&A expense per ton rose only 2%, reflecting operating leverage from increased shipments.
Capital Allocation and Fourth-Quarter Outlook
Cash flow from operations totaled $212 million in the third quarter despite increased working capital needs from higher prices and shipments. Total debt was $1.6 billion at quarter-end, while net debt to EBITDA stood at 0.8 times.
Reliance spent $79 million on capital expenditures, paid $64 million in dividends and repurchased $45 million of common stock during the quarter at an average price of about $395 per share. Its full-year capital expenditure outlook remains approximately $300 million, with about half designated for strategic growth investments.
On Oct. 20, the board increased the company’s share repurchase authorization to $2.5 billion with no expiration date. Since 2021, Reliance has repurchased $3.4 billion of its shares at an average price of about $236, reducing shares outstanding by 23%, Lewis said.
For the fourth quarter, Reliance expects non-GAAP earnings per diluted share of $7.40 to $7.60. The outlook includes approximately $0.70 per share from border wall shipments and assumes healthy demand and tight supply conditions continue, subject to trade policy, geopolitical risks and normal seasonal patterns.
About Reliance (NYSE:RS)
Reliance, Inc (NYSE: RS) is a diversified metals service center company that supplies processed metal products and related services to industrial manufacturers, fabricators, and other commercial customers. Its product offerings include carbon steel, stainless steel, aluminum, copper, brass, and other specialty metals.
The company provides value-added processing services such as cutting, slitting, leveling, blanking, machining, forming, and precision sawing. These services allow customers to purchase metals in customized sizes and specifications, helping reduce their need for in-house processing and inventory management.
Founded in 1939, Reliance serves a broad range of industries, including nonresidential construction, transportation, aerospace and defense, energy, electronics, machinery, and general manufacturing.
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