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Aegion (AEGN) Attains 52-Week High on Strong Order Growth

Zacks Equity Research

Share price of Aegion Corporation AEGN scaled a new 52-week high of $27.19 on Nov 8, eventually closing tad lower at $27.11. The company surged 23.6% in a year, higher than the S&P 500’s gain of 16.5% as well the broader industry’s increase of 18.7%. The company has a market capitalization of $882 million.

Earnings estimates for Aegion have gone up following its upbeat third-quarter results. On Nov 1, Aegion reported third-quarter 2017 adjusted earnings of 32 cents per share, in line with the year-ago quarter. Earnings beat the Zacks Consensus Estimate of 26 cents. Continued momentum across key markets for all three segments translated to strong orders and revenues in the quarter. Consequently, revenues increased 11% year over year to $342 million, ahead of the Zacks Consensus Estimate of $336 million.

In the last seven days, the Zacks Consensus Estimate for fiscal 2017 has gone up 4% and for fiscal 2018, moved up 2%. The company has a trailing four-quarter average positive earnings surprise of 7.05%. Its positive long-term growth of 12.5% holds promise, which is higher than the industry’s growth of 10.5%.

Aegion carries a Zacks Rank #3 (Hold).  The company has an impressive Growth Style Score of A. Our Growth Style Score highlights all the vital metrics of a company’s financials to obtain a clearer picture of the quality and sustainability of its growth. Our research shows that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, offer the best investment opportunities.

Growth Drivers

So far in 2017, Aegion witnessed a surge of 26.2% in new orders to $1.1 billion from $867 million in the prior-year period, driven by continued momentum across key markets for all the three segments.  At third-quarter end, contract backlog was $756 million, an increase of $141 million from contract backlog at Sep 30, 2016.

Aegion’s Infrastructure Solutions segment is poised for growth as the North America Cured-In-Place-Pipe (“CIPP”) rehabilitation business continues to witness persistent expansion due to good market demand. Further, improved pressure pipe market penetration on the back of new product development will boost revenues.

In the Corrosion Protection segment, the cathodic protection business’ margins are gaining from the multiple leadership changes in the first half and the aggressive focus on improved project execution and labor utilization.  Strong backlog position, including the high margin international projects, ongoing restructuring activities in Canada, and improved execution in the U.S. cathodic protection business will enable the segment to deliver improved results going forward.

The Energy services segment has delivered improved year-over-year performance for the third consecutive quarter and is anticipated to continue the same in the near term. Backlog is at the highest levels since 2015 with strong activity across maintenance, turnarounds, and the construction business. Restructuring efforts undertaken in the past are also yielding results.

In August 2017, Aegion announced a series of strategic actions targeted to generate more predictable and sustainable long-term earnings growth. These initiatives are anticipated to generate cost savings over $17 million by 2018 and help reduce future earnings volatility. Along with intended benefits from restructuring activities, a strong backlog and continued strength across key markets will improve profits significantly in 2018.

All these factors are expected to boost the company’s share price in the days ahead.

Aegion Corp Price and Consensus

Aegion Corp Price and Consensus | Aegion Corp Quote

Key Picks

A few better-ranked medical stocks are BELLWAY BLWYY, Patrick Industries, Inc. PATK and United Rentals, Inc. URI. These stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BELLWAY has a long-term expected earnings growth rate of 9.8%.

Patrick Industries has a long-term expected earnings growth rate of 10.6%.

United Rentals has a long-term expected earnings growth rate of 15.6%.

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