U.S. Markets close in 6 hrs 26 mins

Will Lower Seasonal Demand Impact Aegion (AEGN) Q1 Earnings?

Zacks Equity Research
1 / 3

Is TD Ameritrade Holding (AMTD) Outperforming Other Finance Stocks This Year?

Is (AMTD) Outperforming Other Finance Stocks This Year?

Aegion Corporation AEGN is slated to report first-quarter 2018 results on May 2, after the market closes.

In the last reported quarter, Aegion posted negative earnings surprise of 13.04%. In fact, the company’s earnings missed the Zacks Consensus Estimate in three of the last four quarters. The company has a negative average earnings surprise history of 3.57% in the past four quarters.

Let’s see how things are shaping up prior to this announcement.

Aegion Corporation Price and EPS Surprise


Aegion Corporation Price and EPS Surprise | Aegion Corporation Quote

Key Factors to Consider

The Zacks Consensus Estimate for Aegion’s earnings per share is pegged at 12 cents for the first quarter, underlining roughly 33% year-over-year decline. The Zacks Consensus Estimate for total sales of $299 million also indicates nearly 8% drop from the prior-year quarter.

Notably, Aegion’s first quarter is typically the weakest quarter of the year due to lower construction activities in many parts of its business due to adverse weather conditions. Extremely cold temperatures in the first six weeks of 2018 impacted some of Aegion’s business in the United States and Canadian operations, which remains a major headwind for the quarter to be reported.

Moreover, customer work releases are slower at the start of the year. Additionally, results might have been impacted by absence of the large deepwater project which had a strong contribution in the first two quarters of 2017. However, strong backlog, along with continued strength in key markets, as well as the company’s focus on restructuring actions remain catalysts for growth.

Meanwhile, Aegion’s Corrosion Protection segment will be buoyed by focus on improved project execution and labor utilization. However, rising energy and labor costs might have affected the segment’s margin performance. The Zacks Consensus Estimate for this segment’s net sales is pegged at $93 million for the quarter to be reported, down more than 24% from $123 million reported in the prior-year quarter.

Our consensus estimates indicate that sales of Aegion’s Infrastructure Solutions segment will reach $132 million in the quarter, reflecting around 2.3% year-over-year growth. Benefits from further penetration into the pressure pipe market on the back of new product development, investments in underserved North America CIPP (cured-in-place pipe) regions and improved product sales are expected to reflect in the segment’s results.

Further, we expect quarterly sales for the Energy services segment to be $76 million, up around 4% year over year. The segment is anticipated to mainly grow on restructuring efforts. However, restructuring charges and cost inflation remain concerns.

Aegion’s shares have underperformed the industry it belongs to over the past year, affected by the prevalent headwinds. The stock has lost around 0.5% compared to nearly 7% growth recorded by the industry.

Earnings Whispers

Our proven model does not conclusively show that Aegion is likely to beat on earnings this quarter as it does not possess the key components. 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. This is not the case here as you will see below:  

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of 10 cents and the Zacks Consensus Estimate of 12 cents, is -13.04%. 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. While this increases the predictive power of ESP, we also need to have a positive ESP to be confident about an earnings surprise.

It should be noted 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 a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Continental Building Products, Inc. CBPX, with an Earnings ESP of +2.21% and a Zacks Rank #1. The stock has appreciated 19% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

Patrick Industries, Inc. PATK, with an Earnings ESP of +1.86% and a Zacks Rank #2. Its shares have rallied 11% in the past year.

United Rentals, Inc. URI, with an Earnings ESP of +0.42% and a Zacks Rank #2. The company’s shares have been up 44% over the past year.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>