MRC Global (MRC) Exhibits Strong Prospects, Risks Persist
MRC Global Inc. MRC has been benefiting from its diversified presence across several end markets, including upstream production, midstream pipelines, gas utilities and Downstream, Industrial and Energy Transition (“DIET”). The company has been witnessing strength in the DIET sector driven by an increase in energy transition activities in the Unites States. Revenues from the company’s DIET sector increased 4% year over year in the fourth quarter of 2023. Increased customer infrastructure activity in the Permian basin has also been proving beneficial.
The company’s focus on customer service, supported by reliable operations and supply-chain management, and new product introductions bode well. Despite cost inflation, pricing actions are driving the company’s margin performance. For instance, MRC Global’s adjusted gross margin increased 70 bps year over year to 21.9% in the fourth quarter.
MRC has been committed to rewarding shareholders through dividend payouts. In 2023, it paid out dividends worth $24 million. The reduction of debts remains a priority for the company. In 2023, it repaid $882 million in borrowings under revolving credit facilities.
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In the past three months, the Zacks Rank #3 (Hold) company has gained 11.5% against the industry’s decline of 8.4%.
However, a decline in customer spending for modernization and replacement activity and delayed customer projects have been affecting the Gas Utilities and Production & Transmission Infrastructure (PTI) sectors. Revenues from the Gas utilities and PTI sectors decreased 21% and 15% year over year, respectively, in the fourth quarter. MRC expects overall revenues in the range of flat to decline in low-to-mid single digits in 2024.
MRC has also been dealing with adverse impacts of high operating costs and expenses. In 2023, its cost of sales remained high at $2.72 billion. Selling, general and administrative expenses climbed 7% to $503 million in the year due to higher employee-related costs and associated benefit costs.
Promising Stocks
We have highlighted three better-ranked stocks, namely AZZ Inc. AZZ, Valmont Industries VMI and Mueller Water Products MWA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AZZ delivered a trailing four-quarter average earnings surprise of 37.5%. In the past 60 days, the Zacks Consensus Estimate for AZZ’s 2024 earnings has increased 4.9%.
Valmont Industries has a trailing four-quarter average earnings surprise of 5.9%. The consensus estimate for VMI’s 2023 earnings has been stable in the past 60 days.
Mueller Water Products delivered a trailing four-quarter average earnings surprise of 23.7%. In the past 60 days, the consensus estimate for MWA’s 2024 earnings has improved by 9.5%.
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MRC Global Inc. (MRC) : Free Stock Analysis Report
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