Reliance Steel & Aluminum Co. (RS) Income Statement

The sequential acceleration from 15.5% in 2026Q1 to 26.5% in 2026Q2 indicates a sharp inflection in demand, likely reflecting both higher metal prices and improved volumes. This growth appears broad-based, as the company's diversified end markets and decentralized model allow it to capture local demand surges. However, the sustainability of this pace is uncertain, as it may partly reflect inventory restocking and price pass-through rather than pure organic volume expansion.

Despite the revenue surge, gross margin fell 260 basis points year-over-year, indicating that the company may be passing through mill price increases with a lag or facing a less favorable product mix. The structural gross margin of ~27% remains above primary producers, reflecting the value-added processing model, but the recent compression warrants monitoring. If metal prices normalize, LIFO-related headwinds could further pressure reported margins, as seen in the 2025Q4 trough of 25.3%.

SG&A increased only 11.8% year-over-year while gross profit grew 20%, allowing operating margin to expand to 9.5% from 8.5% in the prior year quarter. This suggests the decentralized model enables efficient cost control, with branch-level overhead not rising proportionally with volumes. However, the 2025Q4 operating margin of 5.0% highlights the cyclicality of this leverage, which can reverse sharply when volumes decline.

The cost of purchased metal remains the dominant expense, and the recent acceleration in COGS suggests that mill price increases are not being fully passed through to customers in the short term. This is consistent with the EPS miss of $0.33 versus consensus, which the CEO attributed to cost inflation rather than demand weakness. SG&A discipline remains evident, with SG&A as a percentage of revenue declining to 17.1% from 18.6% a year ago, but the COGS pressure is the primary margin risk.