Post Earnings Coverage as Mistras' Gross Profit Margins Improved in the 6th Consecutive Quarter

Upcoming AWS Coverage on Allegion

LONDON, UK / ACCESSWIRE / January 6, 2017 / Active Wall St. announces its post-earnings coverage on Mistras Group, Inc. (NYSE: MG). The Company released its second quarter fiscal 2017 financial results on December 23, 2016. The engineering services Company's sales and earnings numbers missed market expectations. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Mistras Group's competitors within the Security & Protection Services space, Allegion PLC (NYSE: ALLE), is estimated to report earnings on February 09, 2017. AWS will be initiating a research report on Allegion following the release of its earnings numbers.

Today, AWS is promoting its earnings coverage on MG; touching on ALLE. Get our free coverage by signing up to:

http://www.activewallst.com/registration-3/?symbol=MG

http://www.activewallst.com/registration-3/?symbol=ALLE

Earnings Reviewed

For the three months ended November 30, 2016, Mistras reported that revenues declined by 9% compared to $176.6 million in the prior year. Revenues for H1 2017 declined by 8% compared to prior year's $345.1 million. The decline in the Company's revenue was primarily attributed to weak North American oil and gas market conditions as well as the timing of customer project-related spending. Mistras' sales numbers missed analysts' forecasts of $182.8 million.

Although revenues declined, Mistras' gross profit margins improved y-o-y for the 6th consecutive quarter to 29.5% in Q2 FY17 compared to the prior year's 29.2%. International segment gross margins improved by over 300 basis points to 35.1% from Q2 FY16, while Services segment gross margin declined by 150 basis points to 25.8% compared to the year earlier same quarter, and Products and Systems gross margins declined slightly.

Mistras' net income for Q2 FY17 was $7.7 million, 32% below the year earlier corresponding quarter's net income of $11.4 million. Earnings per diluted share for the reported quarter were $0.26 per diluted share, 33% below the prior year's $0.39 per diluted share. The Company's earnings per share fell short of Wall Street's expectations of $0.36 per share. For Q2 FY17, Mistras' adjusted EBITDA was $22.3 million, or 12.7% of revenues, that is 23% below Q2 FY16 adjusted EBITDA of $29.2 million, or 15.0% of revenues.

Segment Details

Mistras' Services segment operating income before special items declined by $7.1 million, or (37%), in Q2 FY17 compared to the prior year, on revenues that declined by $18 million, or 12%. Services operating income before special items declined by $8.7 million, or 26%, during H1 FY17 compared to the prior year, on revenues that declined by $28.8 million, or 10%. Services H1 FY17 operating margin before special items declined by 200 basis points to 9.7%, driven by a y-o-y revenue and gross margin decline combined with flat operating expenses.

During Q2 FY17, the Company's International segment operating income before special items improved by $3.2 million, or 90%, compared to the prior year, on revenues that grew by $3.8 million, or 10%. International operating income before special items grew by $6.1 million, or 111%, during H1 FY17 compared to the prior year, on revenues that grew by $4.5 million, or 6%.

For Q2 FY17, operating income for Mistras' Products and Systems segment declined by $0.9 million on a revenue decline of $1.1 million, driven by a drop in sales volume and reduced sales mix of products sold.

Balance Sheet

For H1 FY17, Mistras' cash flow from operating activities was $26.0 million in H1 FY17, in-line with the prior year. The Company's free cash flow was $18.5 million in H1 FY17, also in-line with the prior year. Mistras' stated that it primarily utilized free cash flow to make three relatively small acquisitions and to repurchase $7 million of stock. At November 30, 2016, the Company's total debt and capital lease obligations net of cash was $84.1 million, approximately 1.0x of adjusted EBITDA. Mistras used $7 million to repurchase approximately 327,000 shares during Q2 FY17 at an average price of approximately $21.36 per share. As of November 30, 2016, the Company had $43 million remaining on its share repurchase authorization.

Fiscal Year Change

Mistras announced that it is changing its fiscal year end to December 31, effective for December 31, 2016. The Company stated that it has made this choice in order to more closely align its budgeting cycle with most of its customers. The Company's international subsidiaries have traditionally reported results on a one-month lag compared with its North American operations. Effective January 01, 2017, this one-month lag has been eliminated. In March 2017, the Company will file its annual report on Form 10-K for the shortened fiscal period ended December 31, 2016.

Stock Performance

On Thursday, January 05th, 2017, the stock closed the trading session at $24.23, tumbling 7.98% from its previous closing price of $26.33. A total volume of 367.18 thousand shares have exchanged hands, which was higher than the 3-month average volume of 118.13 thousand shares. Mistras Group's stock price advanced 2.67% in the last month, 4.22% in the past three months, and 29.92% in the previous twelve months. Shares of the company have a PE ratio of 29.62.

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SOURCE: Active Wall Street