J.P. Morgan and BMO Capital Markets independently downgraded Reliance Inc. shares, citing stalling gross margins and stretched valuations. Analysts highlighted a 28.7% full-year LIFO-based gross margin in 2025, down from 29.7% in 2024, driven by competitive pressures and a temporary shift in product mix. BMO noted margins may only recover to the lower end of the sustainable 29%-31% range in early 2026, falling short of prior expectations.

Aluminum prices, which account for 50% of Reliance’s LIFO expenses despite representing just 15% of shipment volume, face volatility from tariffs and destocking in semiconductor and aerospace markets. This pressure contributed to Q4 adjusted EPS of $2.40, missing guidance of $2.65-$2.85. J.P. Morgan estimated pre-LIFO/tax impacts eroded earnings to the low end of guidance, while shipments and pricing slightly exceeded forecasts.

Both firms revised 2026 EBITDA estimates downward: BMO to $1.50 billion (from $1.58B) and J.P. Morgan to $4.63 EPS. Reliance’s stock trades at 11.5x and 10.1x forward EV/EBITDA multiples, below its 5-year average of 8.5x but above peers. Analysts acknowledged 17% North American market share and a strong balance sheet but deemed current valuations overpriced.

With management guiding 2026 EPS of $4.50-$4.70 (including a $25M LIFO expense), Wall Street sees limited upside. J.P. Morgan’s $330 target implies flat returns, while BMO’s $320 price suggests an 0.8% loss factoring in dividends. Investors face a valuation tug-of-war between Reliance’s market position and margin headwinds.