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    RS
    Earnings call· Jun 2026(Q2 FY26)

    RELIANCE, INC. RS

    Jul 23, 2026 Source

    Executive summary

    Reliance, Inc. Q2 FY26 — Record Tons Sold and Strong Profitability

    Reliance delivered a strong Q2 FY26, driven by record tons sold and robust pricing across its diversified product portfolio. The company benefited from improving end-market activity, including significant contributions from the U.S. border wall contract, which bolstered profitability despite increased LIFO expense. Management remains optimistic about continued opportunities in the second half of 2026 and into 2027, leveraging its strong balance sheet and strategic investments.

    Highlights

    5

    • Record quarterly tons sold, increased 10.8% year-over-year.

    • Non-GAAP pretax income increased 40% year-over-year to $429 million.

    • Non-GAAP earnings per diluted share of $6.27, up 42% year-over-year and highest since Q2 2023.

    • Sales increased 27% year-over-year on stronger-than-anticipated shipments and pricing.

    • Net debt-to-EBITDA ratio of 0.9, providing substantial liquidity and flexibility.

    Concerns

    4

    • Full-year LIFO expense outlook increased to $300 million from a prior estimate of $150 million.

    • Second quarter LIFO expense of $112.5 million ($1.64 per share) significantly exceeded the $37.5 million ($0.54 per share) estimate.

    • Aluminum pricing from Section 232 tariffs continued to constrain LIFO gross profit margins, contributing approximately one-third of the annual LIFO estimate.

    • Non-GAAP SG&A expense increased 11% year-over-year due to higher incentive compensation, inflationary impacts, and increased freight/fuel costs.

    Guidance & targets

    5
    CategoryTargetConfidence
    Non-GAAP Earnings Per Diluted Share
    $6.40 to $6.60
    high materiality
    High
    LIFO Expense
    $75 million
    medium materiality
    High
    Full-year Capital Expenditure Outlook
    approximately $300 million
    medium materiality
    High
    U.S. Border Wall Contract Phase 1 Sales
    $1.4 billion
    high materiality
    High
    U.S. Border Wall Contract Phase 2 Potential Sales
    roughly $800 million to $900 million
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Non-residential Construction
    Primarily from carbon steel tubing, plate and structural products. Shipments remained strong despite supply constraints, driven by sustained strong activity in data center and related energy infrastructure projects alongside solid demand in heavy civil and public infrastructure work. The U.S. border wall project further strengthened presence in this market.
    		roughly 1/3 of Q2 sales———
    General Manufacturing
    Highly diversified across products, industries and geographies. Growth driven by industrial machinery (including data center equipment), shipbuilding, military, consumer products and construction machinery.
    		about 1/3 of Q2 salesstrong year-over-year growth——
    Aerospace
    Saw early signs of improvement in commercial aerospace supported by improving backlogs as OEM build rates increased, though elevated inventories persist. Defense and space-related aerospace activity remained strong.
    		approximately 9% of Q2 sales———
    Automotive
    Primarily served through toll processing operations (volumes excluded from tons sold). Demand improved in Q2 as flexible toll processing operations adapted to variable demands.
    		about 4% of Q2 sales———

    Operational metrics

    24
    Non-GAAP Pretax Income
    $429 millionup 40% year-over-year
    Q2 FY26
    Non-GAAP Earnings Per Diluted Share
    $6.27up 42% year-over-year
    Q2 FY26

    Highest EPS result since Q2 2023.

    Border Wall Project Contribution to EPS
    $0.41
    Q2 FY26
    LIFO Expense
    $112.5 millionsignificantly above $37.5 million estimate
    Q2 FY26
    Full-year LIFO Expense Outlook
    $300 millionfrom prior estimate of $150 million
    FY26

    Caused by higher-than-anticipated carbon and aluminum product costs.

    LIFO Reserve
    approximately $700 million
    end of Q2 FY26

    Remains available to support future operating results and mitigate impact of future metal price declines.

    Inventory Turn Rate
    approximately 5.2xcompared to 4.8x in 2025
    Q2 FY26

    Based on tons.

    Accounts Receivable DSO
    approximately 42 daysconsistent with the prior year
    Q2 FY26

    Remained healthy.

    Capital Expenditures
    $93 million
    Q2 FY26
    Dividends Paid
    $64 million
    Q2 FY26
    Share Repurchase Program Remaining Authorization
    approximately $529 million
    end of Q2 FY26

    No shares repurchased during the quarter.

    Total Debt
    $1.7 billion
    end of Q2 FY26
    Net Debt-to-EBITDA Ratio
    0.9
    end of Q2 FY26

    Leverage position remains very strong.

    Non-GAAP Gross Profit Margin (FIFO)
    30.5%compared to 30.1% in Q1 FY26, down modestly from 30.6% in Q2 FY25
    Q2 FY26
    Border Wall Project Gross Profit Margin Headwind
    roughly 40 basis points
    Q2 FY26

    Impact on FIFO gross profit margin.

    Border Wall Project Pretax Income Margin Addition
    approximately 30 basis points
    Q2 FY26

    Due to below company average operating cost per ton, offsetting gross profit margin impact.

    Non-GAAP SG&A Expense
    increased 11%compared to Q2 FY25
    Q2 FY26

    Driven by higher incentive compensation, inflationary impacts on compensation and benefits, freight and fuel cost inflation, and higher variable warehousing and delivery costs.

    Non-GAAP SG&A Expense Per Ton
    flat
    Q2 FY26

    Due to favorable operating leverage from higher shipment volumes, including contributions from the U.S. border wall project.

    Average Selling Price
    increased 7.8%from Q1 FY26
    Q2 FY26

    Exceeded expectation of up 1.5% to 3.5%.

    Border Wall Project Offset to Average Selling Price
    1.6 percentage point
    Q2 FY26

    Result of higher shipment volumes of lower-priced products.

    Border Wall Project Contribution to Tons Sold
    5.1 percentage point
    Q2 FY26

    Contribution to sequential increase in Q2 tons sold.

    Aluminum LIFO Impact
    approximately 1/3
    FY26 outlook

    Disproportionately affecting LIFO expense due to Section 232 tariffs and lack of corresponding demand increase.

    Aluminum Margin Compression Noise
    approximately 100 basis points
    Q2 FY26

    Noise at the percentage level, but gross profit per unit and overall gross profit dollars are up significantly.

    Flat-Rolled Order Delay
    about 2 weeks
    Q2 FY26

    Average delay for flat-rolled orders; no signs of suppliers catching up.

    Industry KPIs

    2
    MetricValueDetails
    Safetynot quantified
    Production sales volume by metal and by mineRecord quarterly tons soldtons

    Capital programs

    1
    Full-year 2026 Capital Expenditure Programunderwayapproximately $300 million
    Period spend: $93 million
    Spent to date: $93 million

    Benefit: about half allocated to strategic growth investments to enhance processing capabilities, strengthen customer service, expand our footprint and grow volumes in attractive markets

    For the full year 2026, our capital expenditure outlook remains approximately $300 million with about half allocated to strategic growth investments. During the quarter, we funded $93 million of capital expenditures.

    Risks & headwinds

    5
    Domestic and International Trade PolicyQ3 FY26

    subject to ongoing risks

    U.S.-Iran ConflictQ2 FY26 and Q3 FY26

    fueling freight and fuel cost inflation

    Supply Constraints in Specific ProductsQ2 FY26

    beams is a little tight right now; carbon plate, heat-treat aluminum plate

    Mitigation: Strong domestic mill relationships provide reliable material availability and preferential treatment.

    Elevated Inventories in Commercial AerospaceQ2 FY26

    elevated inventories persist

    Competitor Inventory Holes due to Higher CostsQ2 FY26

    a lot of holes in inventories

    Mitigation: Reliance's robust inventory levels and strong balance sheet allow it to capture market share.

    What to watch in Q3 FY26

    5

    Border wall contract shipment run rate

    Q3 FY26 and subsequent quarters through mid-2027
    CurrentQ2 volumes included 5.1 percentage point contribution to tons sold
    TargetSustained Q3 run rate through mid-2027

    Why it matters

    The border wall contract is a significant contributor to revenue and pretax income, key to overall performance.

    I think you could assume for now that the Q3 guide is -- will be sustained through the following quarters.

    Q&A highlights

    8

    Is there potential for further upside to border wall volumes beyond Q3, or should Q3's run rate be sustained through mid-2027?

    The Q3 volume guidance for the border wall contract is expected to be sustained through mid-2027, representing a near full shipment run rate, subject to metal supply and customer pull.

    “I think you could assume for now that the Q3 guide is -- will be sustained through the following quarters.”

    asked by Sathish Kasinathan · answered by Karla Lewis

    2 min read5 chapters

    Detailed Narrative

    01

    Market Conditions and Performance

    Reliance achieved its second highest quarterly revenue and record tons sold, significantly outperforming broader industry shipment trends. This strong performance was attributed to the company's scale, diversification across end markets, products, and value-add services, as well as its position as a partner of choice with domestic mills. Market conditions remained favorable, supported by improving customer activity, extended mill lead times, and strong pricing across the product portfolio.

    02

    End Market Strength and Border Wall Contribution

    Non-residential construction sales remained robust, representing approximately one-third of Q2 sales, driven by data center, energy infrastructure, heavy civil, and public infrastructure projects. Meaningful improvements were also observed in general manufacturing, aerospace, and semiconductor markets. The U.S. Department of Homeland Security border wall contract provided initial contributions exceeding guidance, significantly boosting Q2 earnings and strengthening presence in non-residential construction.

    03

    Pricing Power and Profitability Drivers

    Elevated pricing levels, coupled with strong execution, drove a 40% year-over-year increase in non-GAAP pretax income and a 42% rise in non-GAAP EPS. Trade policy limiting imports and extended lead times supported strong domestic pricing. The border wall project, despite a 40 basis point headwind on gross profit margin due to lower-priced products, added approximately 30 basis points to pretax income margin by leveraging existing infrastructure and achieving below-average operating costs per ton.

    04

    LIFO Expense and Aluminum Impact

    Higher-than-anticipated carbon and aluminum product costs led to an increase in the full-year LIFO expense outlook to $300 million. Q2 LIFO expense was $112.5 million, significantly above estimates. Aluminum was a notable driver, disproportionately affecting LIFO gross profit margin due to Section 232 tariffs and a lack of corresponding demand increase. Despite this, the company is realizing higher gross profit per ton on aluminum sales and across its entire product portfolio.

    05

    Capital Allocation and Balance Sheet Strength

    Reliance maintains a very strong balance sheet with a net debt-to-EBITDA ratio of 0.9, providing substantial liquidity and flexibility. The company funded $93 million in capital expenditures during Q2, with the full-year outlook remaining at approximately $300 million, half of which is for strategic growth investments. The company also paid $64 million in dividends and has $529 million remaining under its share repurchase program, maintaining an opportunistic approach to buybacks.

    AI-generated summary of the company’s earnings call. Not investment advice.