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MRC Global (MRC) Down on Q4 Earnings Miss, View Positive

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MRC Global Inc. MRC reported lower-than-expected results for fourth-quarter 2017. Shares of the company dipped nearly 3.8% to $16.73 per share as of Feb 16, after the quarterly results were announced.

Bottom-Line Performance

MRC Global reported an adjusted loss of 1 cent per share in the reported quarter, as against the Zacks Consensus Estimate of 3 cents per share. The company had recorded a loss of 18 cents per share in the year-ago quarter.

Adjusted earnings for 2017 came in at 27 cents per share, as against the adjusted loss of $1.10 per share recorded for full-year 2016.

Top-Line Performance

Sales in the reported quarter came in at $903 million, missing the Zacks Consensus Estimate of $912 million. However, quarterly revenues climbed 25.6% year over year. The upside primarily stemmed from improved North American midstream and upstream businesses.

Segmental Details

MRC Global’s fourth-quarter sales in the United States totaled $715 million, up 30% year over year. This upside was driven by increased midstream gathering and transmission, well completions and downstream project deliveries.

International sales came in at $117 million, up 3% year over year. The upswing was supported by increased upstream sector sales and favorable foreign currency-translation impact.  

Revenues from Canada came in at $71 million, up 29% year over year. The year-over-year improvement was backed by solid upstream business and appreciation of the Canadian currency with respect to the U.S. dollar.  

Revenues for 2017 came in at $3,646 million, higher than $3,041 million recorded in the year-ago period.

MRC Global Inc. Price, Consensus and EPS Surprise

 

MRC Global Inc. Price, Consensus and EPS Surprise | MRC Global Inc. Quote

Costs and Margins

Cost of sales during the reported quarter was $762 million compared to $597 million recorded in the year-earlier quarter. Adjusted gross profit margin in the reported quarter came in at 18.5%, flat year over year.

Selling, general and administrative expenses came in at $148 million, as against $128 million incurred in the year-earlier quarter.

Adjusted gross profit margin for 2017 was 18.6%, up 140 basis points year over year.

Balance Sheet and Cash Flow

Existing the fourth quarter, MRC Global had cash worth $48 million, down from $109 million recorded on Dec 31, 2016. Long-term debt at the end of the fourth quarter was $522 million compared to $406 million recorded at the end of 2016.

In 2017, MRC Global used $48 million cash from operations, as against $253 million cash generated in the comparable period last year. Capital expenditure during the fourth quarter was $30 million, down from $33 million recorded in the prior-year quarter.

During the reported quarter, MRC Global repurchased $50 million common stock at an average price of $15.57 per share, under its ongoing $100-million share repurchase program. The program is scheduled to close on Dec 31, 2018.

Outlook

MRC Global noted that sturdier upstream and midstream businesses as well as recovering energy market conditions will bolster its revenues in the upcoming quarters. Furthermore, lower tax rate, resulting from the U.S. tax reform, will likely give rise to cash flow and earnings benefits in 2018.

Zacks Rank and Stocks to Consider

MRC Global carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the

Zacks Categorized Industrial Products Sector are listed below:

Applied Industrial Technologies, Inc. AIT sports a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 10.97% over the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acco Brands Corporation ACCO holds a Zacks Rank #2 (Buy). The company generated an outstanding average positive earnings surprise of 82.49% during the same time frame.

Alarm.com Holdings, Inc. ALRM also carries a Zacks Rank #2, at present. The company recorded a remarkable average positive earnings surprise of 65.40% over the preceding four quarters.

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