RUS: Highlights from Investor Meetings

Research evidence excerpt

RUS: Highlights from Investor Meetings

ore durable pricing strength in

our view, supported by extended lead times and tight supply chain AllPricedvaluesas ofin priorCAD unlesstradingotherwiseday's marketnoted.close, EST (unless otherwise noted).

conditions. Moreover, we are positive on the outlook in Western Canada,

which is showing early signs of increased investment activity that we

believe Russel is well-positioned to capitalize on. Overall, the overarching

takeaway for us from our meetings was that strong demand momentum

points to upside to Q2 and Q3 estimates, in our view, which could

represent a nice catalyst for Russel shares in the coming quarters.

• Kloeckner integration progressing well. The Kloeckner integration was

an important discussion point during our meetings, with management

reaffirming the three-phase integration plan and confirming they

remain in Phase 1. A notable change has been the rollout of variable

compensation tied to return on net assets, which management described

as a meaningful cultural shift driving better alignment at the branch level.

Phase 2, which involves migrating Kloeckner onto Russel's IT platform,

is targeted for Q4/26 with investment underway. We continue to view

Kloeckner as a key idiosyncratic earnings driver through 2026 and into

2027, with margin upside intact in our view as the integration progresses.

• Capital allocation to focus on optionality. Management discussed capital

allocation priorities during the meetings emphasizing the business is

performing well and they are comfortable "letting it run" given the strong

operating backdrop. We interpret this to mean that management is

taking a pause on buybacks - key is that we do not believe this is an

indication the shares are overvalued just that management prioritizes