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MRC Global Inc. Recovery Starts Gaining Steam

Matthew DiLallo, The Motley Fool

The recovery in the oil market continues gaining traction, which is driving up demand for the pipes, valves, and fittings that MRC Global (NYSE: MRC) distributes to energy companies. In fact, demand for those items was the strongest it has been in years, enabling MRC Global to top $1 billion in revenue for the first time in 10 quarters.

MRC Global results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Revenue

$1.01 billion

$862 billion

17%

Net income

$12 million

$0 million

N/A

EPS

$0.13

$0.00

N/A

Data source: MRC Global.

A stack of pipes.

Image source: Getty Images.

What happened with MRC Global this quarter?

Demand was strong across all its business units.

  • MRC Global's revenue not only rose 17% versus the year-ago period but improved 12% from the seasonally weaker fourth quarter. Sales were strong across all sectors and geographies.
  • Leading the charge was the upstream segment, where sales surged 23% year over year to $302 million, mainly thanks to its U.S. segment as higher oil prices fueled a rebound in customer activities.
  • Revenue from the downstream segment was also strong, rising 21% versus the year-ago period to $298 million partly because of a large ongoing project in Pennsylvania.
  • Finally, midstream revenue improved 11% versus last year's first quarter to $410 million mainly due to sales to gas utility customers.
  • The uptick in revenue, along with lower costs, helped drive the year-over-year earnings improvement. 
  • The company repurchased $30 million in stock during the quarter and another $20 million in April, which used up its $100 million authorization. When added to 2015's buyback, MRC Global has retired 14.6 million shares since the oil market downturn began, reducing its outstanding share count to 89.7 million.

What management had to say

CEO Andrew Lane said:

The year has started strong with revenue of $1.01 billion in the first quarter resulting in growth of 17% over the first quarter last year and 12% growth over the fourth quarter of 2017. This is the first quarter in the past ten that revenue has been over $1 billion. Adjusted EBITDA was also strong at $59 million, or 5.8% of sales, in the first quarter.

MRC Global is off to an excellent start in 2018 largely because of higher oil prices. Those higher prices are providing oil and gas companies with more cash flow, which they're investing to increase production. That's driving up demand for pipes, valves, and fittings not only to these producing customers but to those in the midstream sector as well because they need to build the gathering and transmission pipelines to move this production to market centers.

Looking forward

"With the macroeconomic conditions across all our end-markets improving, our solid customer contract position and the first‑class execution our team delivers, we expect our performance to show continued strength in 2018," Lane said.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends MRC Global. The Motley Fool has a disclosure policy.