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MRC Global (MRC) Displays Bright Prospects, Risks Persist

Zacks Equity Research

On Mar 6, we issued an updated research report on MRC Global Inc. MRC.

In the past month, this Zacks Rank #3 (Hold) stock has returned 10.9% compared with the industry’s rise of 7.1%.



Existing Scenario

MRC Global’s U.S. segment is witnessing improved operational performance, backed by strengthening upstream and downstream businesses. It expects this trend to continue and drive its top line in the quarters ahead. Moreover, the Canada segment is experiencing improved performance on the back of healthy upstream business.

Going forward, elevated demand for popular product lines, including carbon steel pipe, fittings & flanges as well as valves, automation, measurement & instrumentation, will likely bolster the company’s sales. Moreover, MRC Global is poised to become more competent on the back of lucrative contract wins and projects. For instance, the company is trying to address the Permian basin productivity shortfall by actively working on several major transmission projects. These projects are anticipated to boost its revenues by $150-$200 million in 2018-2020.

However, MRC Global’s midstream fourth-quarter revenues fell 0.5% year over year. The downside stemmed from lower sales generated from transmission and gathering customers. The company stated that completion of large TransCanada transmission project had weighed over the sector’s sales during the quarter. As a matter of fact, MRC Global’s segmental results were hurt by weak midstream sales in the fourth quarter. In fact, ongoing midstream business issues might continue to trouble the company in the quarters ahead.

In addition, inflationary pressure (especially inflation in line pipe prices) is likely to continue escalating the company’s LIFO-related expenses. Notably, it currently expects to witness LIFO expenses of $25-50 million in 2019.

Stocks to Consider

Some better-ranked stocks in the same space are iRobot Corporation IRBT, Tetra Tech, Inc. TTEK and Brady Corporation BRC. While iRobot sports a Zacks Rank #1 (Strong Buy), Tetra Tech and Brady carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

iRobot pulled off average positive earnings surprise of 92.23% in the trailing four quarters.

Tetra Tech delivered average earnings surprise of 7.34% in the trailing four quarters.

Brady delivered average positive earnings surprise of 5.71% in the trailing four quarters.

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