Reliance Inc. faced rating cuts from both JP Morgan and BMO Capital Markets after analysts pointed to weakening gross margins and stretched valuation levels. JP Morgan set a December 2026 price target of USD 330, suggesting limited upside from current levels. BMO lowered its target to USD 320, implying a 0.8 per cent total loss when factoring in the company’s 1.5 per cent dividend yield.

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BMO analyst Katja Jancic noted that Reliance’s gross profit margin during the second half of 2025 fell below the company’s stated sustainable annual range of 29 per cent-31 per cent. She attributed the decline to competitive market conditions, a temporary shift in product mix, and management’s emphasis on driving volume growth. According to BMO data, full-year 2025 gross margin on a LIFO basis declined to 28.7 per cent from 29.7 per cent in 2024.

Jancic now expects margins to recover only modestly into the lower end of the sustainable range in the first quarter of 2026, below her previous expectations. She reduced her 2026 EBITDA forecast to USD 1.50 billion from USD 1.58 billion and lowered her EPS estimate to USD 17.31 from USD 18.45. She also noted that the stock is trading at 11.5x and 10.1x her 2026 and 2027 EV/EBITDA estimates, compared with historical one- and two-year forward multiples of 8x-9x, adding that further multiple expansion appears unjustified under current margin trends.

JP Morgan analyst Bennett Moore highlighted similar pressures. Adjusted gross margin on a FIFO basis declined 50 basis points quarter-over-quarter to 28.5 per cent in the fourth quarter, missing management’s guidance of flat-to-slightly-up performance. Moore attributed much of the sustained pressure to aluminium price volatility linked to tariffs. Aluminium represents approximately 50 per cent of LIFO expense while accounting for about 15 per cent of shipment volume. He added that aluminium-exposed semiconductor and commercial aerospace markets remain in a destocking phase, limiting customers’ willingness to absorb higher prices.

Reliance reported fourth-quarter adjusted earnings per share of USD 2.40, an 8 per cent increase year-over-year but below the company’s guidance range of USD 2.65-USD 2.85 and JP Morgan’s pre-print estimate of USD 2.92.

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Shipment volumes increased 5.8 per cent year-over-year, exceeding the company’s 3.5 per cent -5.5 per cent guidance range. Average selling prices rose 0.9 per cent, surpassing flat guidance.

For the first quarter of 2026, management projected earnings per share between USD 4.50 and USD 4.70, inclusive of a USD 25 million LIFO expense. JP Morgan estimated USD 4.63, while Moore observed that buy-side expectations were closer to USD 5. Management expects shipments to increase 5 per cent -7 per cent sequentially and pricing to rise 3 per cent -5 per cent, alongside modest improvement in FIFO gross margins.

Moore applied an 11x multiple to his 2027 EBITDA estimate of USD 1.59 billion to derive the USD 330 price target. He described that multiple as above Reliance’s five-year average of approximately 8.5x and one-year average of around 10x, though still below industrial distributor peers trading at roughly 15x.

Both analysts acknowledged the company’s market share gains, which expanded its position to approximately 17 per cent of North American metals service center shipments in 2025, along with its counter-cyclical free cash flow generation and strong balance sheet. However, they concluded that these strengths are already reflected in the current share price.

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