Market Over-reacted to Reliance Steel's Poor Guidance

Reliance Steel & Aluminum (RS) announced record earnings today of $1.59/share (ahead of consensus estimates of $1.57/share), yet the stock price dropped 6.24% (ouch that hurts). So what gives?

The problem is that management announced they expect demand to soften in the 3rd quarter and gave guidance for 3rd quarter earnings in the range of $1.30 to $1.35 which is well below analyst composite forecast of $1.52/share.

I'm not selling my shares of RS because the stock is still cheap. P/E is still low relative to competitors and margins are still excellent. Also, I have faith in the industry's continued growth potential, and I have faith in Reliance as an industry leader. I think the market over reacted today.