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Aegion's Unit Wins $10M Contract

Zacks Equity Research

Insituform Technologies, LLC – a unit of Aegion Corporation (AEGN) – has secured a wastewater pipelines rehabilitation contract worth $10 million from the City of Baltimore, Maryland.

Insituform, a global leader in the development and installation of proprietary technologies and services for rehabilitating sewer, water and other underground piping systems, will use its Cured-in-Place Pipe (:CIPP) technology to perform the wastewater pipeline rehabilitation.

As per the contract, Insituform will install nearly 7 miles of small and medium diameter CIPP in wastewater pipelines in the city, out of which 1 mile will be for medium-diameter trunk sewers.

Insituform has prior experience of working in this field in the City of Dallas. Nevertheless, the task is challenging as a large bypass system and effective traffic control in the city center and Inner Harbor areas would be required. However, the unit’s expert team is expected to overcome the challenge successfully.

Including the aforementioned deal, Aegion has secured contracts to the tune of around $56.9 million from the City of Baltimore since Sep 2012. The project is expected to begin in mid 2014 and will be completed after 16 months.

Aegion reported fourth-quarter 2013 adjusted earnings from continuing operations of 40 cents per share, marking a year-over-year fall of 2%.The decrease was owing to disappointing performances by its Energy and Mining as well as Commercial and Structural businesses.

For full-year 2014, Aegion forecasts earnings per share in the range of $1.50 to $1.70. Cash flow from operations is expected to be $100–$110 million. The company anticipates return on invested capital in the band of 7%–8%.

Aegion is expected to benefit from Brinderson’s contribution, vertical integration, the expertise of veteran engineers and intellectual property protections across the value chain. Continued growth in the corrosion engineering as well as cathodic projection and linings business will also boost profitability.

Moreover, strategic investments and backlog will be accretive to Aeigon. A favorable market outlook supporting water and wastewater will also drive growth. However, Aegion remains cautious about the pipe coating market.

Chesterfield, Mo.-based Aegion is a diversified building and construction company which provides infrastructure protection, proprietary technologies and services. It also offers services related to the rehabilitation and improvement of sewer, water, energy and mining piping systems.

Aegion currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include CaesarStone Sdot-Yam Ltd. (CSTE), USG Corporation (USG) and Wolseley plc (WOSYY). While CaesarStone sports a Zacks Rank #1 (Strong Buy), USG Corporation and Wolseley have a Zacks Rank #2 (Buy).

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