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MRC Global (MRC) Displays Solid Prospects, Headwinds Persist

Zacks Equity Research
·3 min read

On Oct 1, we issued an updated research report on MRC Global Inc. MRC.

The company is likely to continue benefiting from several growth drivers in the quarters ahead. However, it is exposed to various challenges, which might take a toll on the firm.

Present Scenario

MRC Global has been benefiting from lucrative contract wins and projects over the past few quarters. The company secured new contracts from Noble Midstream and Ameren in the first half of 2020. Also, it renewed a number of five year contracts with its gas utility customers, including three of its largest — Dominion, PG&E and TECO Energy. It is worth noting that in the 12 months ended Jun 30, 2020, the company generated roughly 55% of revenues from its top 25 customers.

Also, MRC Global’s presence across several end markets, including upstream production, midstream pipelines, chemicals & refining, and gas utilities has been enabling it to neutralize operating risks related to a single market. Also, its focus on expanding market share, enhancing profitability and working capital efficiency is likely to be advantageous.

In addition, it remains committed to rewarding shareholders handsomely through dividend payments. In 2019, the company used $75 million for repurchasing shares and $24 million for paying dividends. Moreover, in both the first and second quarters of 2020, the company used $6 million for paying out dividends.

However, low customer demand, weakness in the oil & gas industry, reduced customer budgets and unfavorable commodity price environment weigh on its top-line performance in the near term. Also, MRC Global’s high-debt profile poses a concern. In the last three years (2017-2019), its long-term debt rose 10% (CAGR). The metric was $470 million at the end of the second quarter of 2020. Further increase in debt levels can raise the company’s financial obligations and prove detrimental to its profitability.

Further, it faces stiff competition from several of its peers in the industry like DXP Enterprises, Inc. DXPE, Forum Energy Technologies, Inc. FET and Helix Energy Solutions Group, Inc. HLX.

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MRC Global Inc. (MRC) : Free Stock Analysis Report
 
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Helix Energy Solutions Group, Inc. (HLX) : Free Stock Analysis Report
 
Forum Energy Technologies, Inc. (FET) : Free Stock Analysis Report
 
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Zacks Investment Research