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Aegion (AEGN) Q4 Earnings Beat, Revenues Miss Estimates

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Zacks Equity Research
·5 min read
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Aegion Corporation AEGN reported better-than-expected earnings and revenues for fourth-quarter 2020. Solid contributions from the Insituform North America business offset the COVID-related impacts from Energy Services and the coatings business within Corrosion Protection. Following the announcement, shares of the company jumped 4.2% after the trading hours on Mar 10.

Charles R. Gordon, president and chief executive officer of Aegion, said, “Our improved performance from continuing operations in the face of unprecedented market disruption demonstrates the resiliency and commitment of our employees globally as well as the critical need for our products and services”

Notably, management has been evaluating alternatives for the Energy Services segment. In December 2020, the board of directors approved a plan to sell the Energy Services operating segment.

Recently, Aegion entered a merger agreement with the affiliates of New Mountain Capital, L.L.C. The company is to be acquired by New Mountain for $963 Million and, thereby, will become a private company. Aegion’s shares will no longer be listed on any public market.

Earnings & Revenue Discussion

Aegion reported adjusted earnings per share of 31 cents, which topped the consensus mark of 30 cents by 3.3% but declined 3.1% from the year-ago figure of 32 cents.

Meanwhile, total revenues of $205.5 million missed the consensus mark of $256.1 million by 19.8%. Also, the reported figure was down 8.6% on a year-over-year basis. COVID-related project deferrals on larger international coating projects were partially offset by the flagship Insituform North America business’ strong revenues, new orders and backlog. The Insituform North America business was driven by its leading market position, and strength and stability of municipal water as well as wastewater markets.

The quarter-end backlog was $662.6 million. Excluding the impacts of exited or to-be-exited businesses, backlog grew 0.7% year over year.

Aegion Corporation Price, Consensus and EPS Surprise

Aegion Corporation Price, Consensus and EPS Surprise
Aegion Corporation Price, Consensus and EPS Surprise

Aegion Corporation price-consensus-eps-surprise-chart | Aegion Corporation Quote

Operating Highlights

Adjusted gross margin of 25.1% expanded 60 basis points (bps) from the year-ago period. Adjusted operating margin of 8.4% also increased 150 bps from the year-ago period.

Segmental Performance

Infrastructure Solutions: Revenues in the segment declined 3.3% year over year to $142.8 million.

Adjusted gross and operating margins contracted 170 bps and 20 bps, respectively, as a result of lower revenues in the fourth quarter of 2020 from the year-ago quarter.

The segment’s backlog (excluding the impacts of exited or to-be-exited businesses) was at $291.4 million, down 3.9% year over year.

Corrosion Protection: The segment’s revenues fell 18.7% year over year to $62.6 million. The downside was due to lower Corrpro North America volumes related to the downsizing of the construction business. Also, international project delays in the Coating Services business added to the woes.

Adjusted gross and operating margins surged 501 bps and 330 bps, respectively, which can be attributed to an improved performance from the Middle East industrial linings operations, and efficiencies and cost-cutting measures taken by U.S. cathodic protection operations in response to lower revenues.

Backlog (excluding the impacts of exited or to-be-exited businesses) in the segment amounted to $121.9 million, down 4% year over year.

Financial Update

Aegion’s cash and cash equivalents as of Dec 31, 2020, were $94.8 million, up from $64.9 million at 2019-end. The company paid off its revolver borrowings in the quarter, resulting in net debt levels of $56 million.

Long-term debt, without current maturities, totaled $194 million compared with $243.6 million at 2019-end. Net cash provided by operating activities was $110.7 million for 2020 compared with $78.8 million in the year-ago period.

2020 Highlights

Total revenues were $807.8 million for 2020 compared with $885.9 million reported in 2019. IT increased 8.8% year over year.

In 2020, gross margin from continuing operations was 24.6%, increasing 70 bps from the prior year.

Adjusted earnings per share were $1.05 for 2020 compared with $1.02 reported in 2019.

Zacks Rank

Aegion currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Building Products - Miscellaneous industry are TopBuild Corp. BLD, Owens Corning OC and Masco Corporation MAS, each carrying a Zacks Rank #2 (Buy) at present.

TopBuild has an expected earnings growth rate of 28.7% for 2021.

Owens Corning’s 2021 earnings are expected to grow 25%.

Masco has an expected earnings growth rate of 8% for 2021.

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