BMO Capital Markets announced a change in its view of Reliance Steel & Aluminum Co., moving the stock from an Outperform rating to Market Perform and reducing its 12-month price objective to $320 from $340. The analyst team said the decision reflects a more muted margin recovery than previously anticipated, limited near-term catalysts to drive rerating, and the stock's current valuation.
At the time of the note, the share price was trading near $327. Data cited by the analyst team suggest the stock is trading above its Fair Value estimate. The firm highlighted ongoing concerns around gross profit margins even as the company reported trailing-12-month EBITDA of $1.3 billion.
Analyst Katja Jancic maintained the view that Reliance Steel remains a best-in-class metals service center and processor. The research note emphasized the company's ability to deliver steady through-cycle results, including counter-cyclical free cash flow generation and a balance sheet described as healthy.
On the balance sheet, BMO pointed to metrics that support a balanced capital allocation approach, noting a current ratio of 4.88. In tandem with the rating change and price-target cut, the firm reduced its forward estimates for the business.
The research also referenced the company's long-standing dividend policy, noting 15 consecutive years of dividend increases, which the analyst said underscores management's focus on returning capital to shareholders. The analyst team indicated they are stepping back from the prior Outperform stance due primarily to the weaker margin outlook and the absence of clear near-term company-specific catalysts.
In separate company results cited in the note, Reliance Steel reported fourth-quarter 2025 earnings per share of $2.96, above expectations of $2.80, and revenue of $3.5 billion, exceeding the $3.43 billion analysts had forecast. Those quarterly results were characterized as strong performance for the period, though the firm noted that subsequent share-price movement was not the central focus of its analysis.
The combination of pressure on gross margins, a valuation the analyst described as full relative to its Fair Value estimate, and the lack of immediate catalysts led BMO to adopt a more cautious stance. At the same time, the firm left intact its recognition of the company's operational strengths, including resilient free cash flow and a solid liquidity position.
The downgrade reflects a reassessment of potential near-term upside rather than a change in the view of Reliance's franchise quality, according to the note.