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Aegion (AEGN) to Report Q4 Earnings: What's in the Offing?

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Aegion Corporation AEGN is scheduled to release fourth-quarter 2017 results on Feb 28, after the closing bell. In the last reported quarter, the company’s earnings came in line with the prior-year quarter while revenues improved 11%.


Continued momentum across key markets for all three segments translated to strong orders and revenues in the quarter. However, this was offset by the impact of restructuring activity in the Infrastructure Solutions segment.


In the last four reported quarters, Aegion’s earnings surpassed the Zacks Consensus Estimates on two occasions while missing the other two. The company recorded an average positive earnings surprise of 7.05%.


Aegion Corporation Price and EPS Surprise

Aegion Corporation Price and EPS Surprise

Aegion Corporation price-eps-surprise | Aegion Corporation Quote

Let’s see how things are shaping up for this quarter.

Earnings Whispers


Our proven model does not conclusively show that Aegion is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here, as you will see below.


Zacks ESP: Aegion’s Earnings ESP is -14.28% as the Most Accurate estimate of 20 cents is pegged lower than the Zacks Consensus Estimate of 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


Zacks Rank: Aegion currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s rank combined with a negative ESP makes positive surprise quite unlikely this season.


Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.


Factors at Play


Aegion is undergoing a series of strategic actions per which the company has planned to divest the Corrosion Protection’s pipe coating and insulation business in Louisiana. Per the plan, the company has approved to exit all non-pipe-related contract applications for the Tyfo Fibrwrap system in North America, restructure Corrosion Protection’s operations in Canada and implement cost-reduction actions as well. The company will continue to face performance issues subject to restructuring actions, which along with associated costs will impact fourth-quarter earnings.


Nevertheless, Aegion’s strong end markets, strong backlog and order growth will aid fourth-quarter results. Notably, per the company’s contract backlog on Sep 30, 2017 was $756 million, a $141 million increase year over year. In the first nine-month period of 2017, Aegion noted a 26% rise in new orders to $1.1 billion. Per the Zacks Consensus Estimates, total backlog for Aegion in the fourth quarter will be around $740 million, up 4% year over year. Segment wise, the backlog for the Corrosion Protection, Infrastructure Solutions and Energy Services will be around $180 million, $350 million and $210 million, respectively.


Per the Zacks Consensus Estimates, revenues for the Corrosion Protection segment are projected at $98 million, a 18% year-over-year drop reflecting the impact of restructuring actions and challenges in the U.S. cathodic protection business. However, revenues for the Energy Services segment are anticipated to rise 3% to $67 million benefiting from improved backlog levels.


The Infrastructure Solutions segment’s revenues are projected to grow 11% year over year to $152 million. The Infrastructure Solutions segment is poised for growth as the North America CIPP rehabilitation business continues to witness persistent expansion owing to good market demand. Further, improved pressure pipe market penetration on the back of new product development will boost revenues. Per the Zacks model, total revenues are currently pegged at $332.5 million, 3% growth over the prior-year quarter.


The Corrosion Protection segment is expected to report operating profit of around $1.4 million, a substantial drop from the $10.1 million reported in the prior-year quarter. The Energy Services segment’s operating income is projected at $1.18 million compared with $1.4 million in the prior-year comparable period. However, the Infrastructure Solutions segment will log 21% improvement in profit to $12.6 million.


The Zacks Consensus Estimate for earnings per share is pegged at 23 cents, a decline of 48% year over year.


Over the past year, Aegion has underperformed the industry it belongs to. The company has gained around 4.8%, while the industry registered growth of 16.5%.



Stocks That Warrant a Look


Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.


Toll Brothers, Inc. TOL has an Earnings ESP of +9.62% and a Zacks Rank #1. Its shares have rallied 35% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.


MasTec Inc. MTZ has an Earnings ESP of +8.53% and a Zacks Rank #2. Its shares have appreciated 30% in a year’s time.


Builders FirstSource, Inc. BLDR has an Earnings ESP of +10.14% and a Zacks Rank #2. Its shares have rallied 62% in a year’s time.


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