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Aegion (AEGN) Stock Surges 51% YTD: Outruns Industry Peers

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Zacks Equity Research
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Aegion Corporation AEGN has been benefiting from timely acquisition, strategic initiatives and business divesture actions. Also, the company is focused on enhancing its technology on a continuous basis.

Notably, shares of Toll Brothers have gained 50.6% so far this year compared with the industry’s 15.6% rally. The price performance was backed by a solid earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters. Also, earnings estimates for 2021 have moved up 4.6% in the past 30 days. The positive trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Major Growth Drivers

Strategic Initiatives & Growth Opportunities: Aegion is steadily moving toward the conclusion of a five-year restructuring plan, initiated in July 2017. Notably, the company completed a significant portion of reorganizational plan in early 2020. Moving into 2021, the company has been transforming into a new phase of growth for the organization and is focused on profitable expansion in core markets with less exposure to international and lumpy project-based businesses.

The company’s Insituform North America business remains well positioned for 2021, with a strong backlog in hand. Also, Aegion continues to see strength in the municipal water and wastewater space owing to robust long-term demand. As a whole, the company has opportunity in maintaining market share in the North America gravity sewer rehabilitation market, while commercializing new Insituform technology offerings and expanding presence in the pressure pipe water market. The company is also executing several international project opportunities for United Pipeline Systems and Coating Services businesses. Notably, Aegion is witnessing significant profitability improvements in the Corrpro business and also advancing the Energy Services business into new geographies.

Improved Housing Market: Although mortgage rates rose slightly from mid-March 2021, the rates are still low compared to the year-ago period, thereby driving the U.S. residential market of late. Greater-than-expected demand for home-improvement products has been benefiting the company.

The high demand has been a boon for Aegion and companies like United Rentals, Inc. URI, Owens Corning OC and TopBuild Corp. BLD in the Zacks Building Products – Miscellaneous industry, each sporting a Zacks Rank #2 (Buy).

Technological Improvements: Technological enhancement is an integral part of Aegion’s growth strategy. In the past few years, the company has been investing significantly in research and development (R&D) of new techniques. In 2019, Aegion’s crew productivity improved substantially and it added many new technology offerings to its product portfolio to boost its position as a global leader, and provide CIPP water and wastewater rehabilitation solutions. The R&D’s primary aim is to reduce material and installation costs for the Tyfo system while maintaining the superiority and quality of the technology. During the years ended Dec 31, 2020, 2019 and 2018, the company spent $4.9 million, $6.4 million and $5.6 million, respectively, on R&D -related activities, including engineering. Consequently during 2020, the company reduced adjusted operating costs by 11% as a result of cost reduction across segments, which led to a 7.4% increase in adjusted operating income in the Infrastructure Solutions segment. Adjusted operating margins increased 100 basis points to 7% in 2020 in the segment.

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Aegion Corporation (AEGN) : Free Stock Analysis Report

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