Aegion (AEGN) Q4 Earnings Lag, Provides Upbeat '18 View
Aegion Corporation AEGN reported fourth-quarter 2017 adjusted earnings of 20 cents per share, a 55% drop from the year-ago quarter. Earnings also missed the Zacks Consensus Estimate of 23 cents.
Including one-time items including after-tax charges for restructuring and acquisition related expenses, Aegion reported loss of $39 cents per share in the quarter against an earnings of 52 cents per share recorded in the prior-year quarter.
Total revenues of $337 million in the quarter increased 5% year over year. Revenues beat the Zacks Consensus Estimate of $333 million.
Adjusted cost of sales increased 9% to $273 million from $250 million in the year-ago quarter. Adjusted gross profit decreased 10% to $64 million from $71 million in the prior-year quarter. Adjusted gross margin contracted 320 basis points (bps) year-over-year to 19%.
Aegion Corporation Price, Consensus and EPS Surprise
Aegion Corporation Price, Consensus and EPS Surprise | Aegion Corporation Quote
Adjusted operating expenses went up 2% year over year to $51 million. Adjusted operating income declined 38% year over year to $13.5 million. Operating margin in the quarter came in at 4%, contracting 280 bps from the year-ago quarter.
Revenues from the Infrastructure Solutions segment improved 17%, year over year to $160 million. The segment’s adjusted operating income increased 9% year over year to $13 million.
The Corrosion Protection segment’s revenues declined 146% to $103 million from $119 million recorded in the prior-year quarter. The segment reported an adjusted operating profit of $0.8 million, down from the $10.1 million reported in the year-ago quarter.
Revenues in the Energy Services segment improved 13% year over year to $74 million. The segment reported an adjusted operating profit of $1.4 million, flat year over year.
Cash flow from operations came in at $66.3 million during 2017, compared with $73.2 million in the prior year. Aegion ended 2017 with cash balance of $106 million compared with $130 million at the end of 2016.
Aegion’s consolidated backlog came in at $689 million as of Dec 31, 2017, up 16% year over year. New orders increased 20% to $1.36 billion during 2017.
Fiscal 2017 Performance
Adjusted earnings for 2017 were a record $1.03, a dip of 6% from $1.10 in 2016. Earnings came in line with the Zacks Consensus Estimate. Including one-time items, the company reported loss per share of $2.08 against earnings per share of 84 cents in 2016.
Net sales increased 11% year over year to a record $1.36 billion and surpassed the Zacks Consensus Estimate of $1.35 billion.
Update on Strategic Actions
In August 2017, Aegion had embarked on a series of strategic actions targeted to generate more predictable and sustainable long-term earnings growth. Among others, the company initiated a process to divest the Corrosion Protection’s pipe coating and insulation business in Louisiana. It also has made progress on restructuring activities associated with the decision to exit the Infrastructure Solutions’ North American activity for non-pressure pipe contracting applications of the Tyfo Fibrwrap system.
The company was also involved in restructuring activities associated with Corrosion Protection’s operations in Canada, which also included downsizing activities reflecting current and anticipated market conditions as well as implementation of other cost savings initiatives across the company.
Aegion incurred total restructuring charges of $110 million 2017. For 2018, total restructuring and impairment charges are estimated to be between $115 and $120 million, with total cash charges of $19 to $21 million, most of which are expected to be completed before the end of first half of 2018. The company’s restructuring and cost savings initiatives are anticipated to generate over $20 million in 2018.
Backed by its strategic actions along with ongoing market and order strength along with robust backlog position, Aegion expects adjusted earnings per share to rise more than 30% in 2018.
Share Price Performance
In a year, Aegion has underperformed the industry with respect to price performance. The stock dipped 8%, while the industry recorded growth of 9.7%.
Zacks Rank & Stocks to Consider
Aegion currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Louisiana-Pacific Corporation LPX, MasTec, Inc. MTZ and United Rentals, Inc. URI. While Louisiana-Pacific sports a Zacks Rank #1 (Strong Buy), MasTec and United Rentals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Louisiana-Pacific has a long-term earnings growth rate of 5%. The company’s shares have rallied 17% over the past year.
MasTec has a long-term earnings growth rate of 14%. The stock has gained 22% in a year’s time.
United Rentals has a long-term expected earnings growth rate of 18.5%. the stock has appreciated 35% over the past year.
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