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Aegion's Wastewater Restoration Deal Win Boosts CIPP Business

Zacks Equity Research

Aegion Corporation’s AEGN subsidiary, Insituform Technologies, LLC inked a $15.7-million deal to rehabilitate more than 22 miles of small, medium and large-diameter wastewater pipelines in Georgia.

With the help of the Insituform cured-in-place pipe (“CIPP”) technology, the company will provide trenchless solutions — particularly in residential areas — replacing the conventional dig-and-replace method. Notably, the work will begin in October 2019 and is expected to be completed within 12 months.

Aegion is a market leader in maintaining, rehabilitating and strengthening infrastructure across the world. Since 1971, the company has maintained its position in the remediation of wastewater pipelines in North America using the CIPP technology.

Exceptional CIPP Technology – A Major Growth Driver

Aegion’s Infrastructure Solutions business — which accounted for 48.8% of second-quarter 2019 revenues — has completed several large wastewater pipeline projects. Markedly, the segment is the largest contributor to its top-line growth.

The CIPP technology is a trenchless, jointless and seamless pipe-within-a-pipe solution that is used to renovate pipes of numerous diameters. In fact, the Insituform CIPP is the first trenchless technology that is cost effective and causes less disruption. The CIPP technology is the largest contributor to the segment’s top-line growth.

In second-quarter 2019, its adjusted earnings grew 9% year over year, despite a 4.9% decrease in consolidated revenues. The upside mainly stemmed from strong Infrastructure Solutions business, and significant top and bottom-line growth from Energy Services.

The company — which share space in the Zacks Building Products - Miscellaneous industry with Construction Partners, Inc. ROAD, frontdoor, inc. FTDR and Quanex Building Products Corporation NX — expects a modest improvement in adjusted EPS for the current year on the back of its strong backlog position and market outlook for core businesses.

Particularly in the Infrastructure Solutions business, it predicts revenue growth to be 2-4% after adjusting for the effect of exited or to-be-exited operations, supported by estimated improvements in crew productivity and project mix within North America CIPP.

Notably, contract wins like the latest one are expected to help it post solid results in the upcoming quarters as well.

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