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MRC Global (MRC) Q2 Earnings & Revenues Top Estimates, Up Y/Y

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·4 min read
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MRC Global Inc. MRC reported better-than-expected second-quarter 2021 results. Its bottom line surpassed estimates by 100%, and sales exceeded the same by 3.4%. This was the sixth consecutive quarter of better-than-anticipated results.

In the quarter, the company reported adjusted earnings of 8 cents per share, beating the Zacks Consensus Estimate of 4 cents. This compares to an adjusted loss of 10 cents per share reported in the year-ago quarter.

Revenue Details

In the reported quarter, MRC Global’s revenues totaled $686 million, reflecting a year-over-year increase of 14%. The improvement was driven by broad based recovery across all sectors, except midstream pipeline.

The company’s revenues surpassed the Zacks Consensus Estimate of $664 million.

Based on MRC Global’s product line, revenues from carbon pipe, fittings and flanges increased 22.9% year over year to $188 million. Revenues from valves, automation, measurement and instrumentation decreased 2.4% to $243 million, while that from gas products increased 42.1% to $162 million. Sales for general products rose 1.8% to $57 million, and that for stainless steel, and alloy pipe and fittings increased 20% to $36 million.

Based on the sectors served, revenues from the Upstream production were approximately $143 million, increasing 6.7% from the year-ago quarter. Midstream pipeline sales totaled $83 million, down 4.6%, and Gas utilities sales totaled $269 million, increasing 31.2% year over year. Downstream & industrial sales were $191 million, reflecting a rise of 8.5%.

The company has three reportable segments — the U.S., Canada and International.

Sales generated from the U.S. segment (representing 81.3% of the company’s second-quarter revenues) totaled $558 million, increasing 17.7% year over year. The results benefited from increasing activity levels in the Gas utilities sector and strength in upstream production and downstream & industrial sectors. However, this was partially offset by weakness in midstream pipeline sector.

Revenues from the Canada segment (4.4% of the quarter’s revenues) moved up 7.1% year over year to $30 million on improvement in the upstream production and downstream & industrial sectors.

Sales from the International segment (14.3% of the quarter’s revenues) declined 2% to $98 million. The results were adversely impacted by lower activity levels in the upstream sector. However, foreign currency translation had a favorable impact on results.

Margin Profile

In the quarter under review, MRC Global’s cost of sales increased 9.8% year over year to $574 million. Adjusted gross profit in the quarter moved up 13.6% to $134 million. Margin was 19.5% in the reported quarter compared with 19.6% in the year-ago quarter. Adjusted selling, general and administrative expenses were down 2.9% to $101 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 111.8% year over year to $36 million, while adjusted EBITDA margin was up 240 basis points to 5.2%. Interest expenses declined 14.3% to $6 million.

Balance Sheet and Cash Flow

Exiting second-quarter 2021, MRC Global’s cash balance declined to $63 million from the previous quarter’s balance of $132 million. Long-term debt decreased 22.3% sequentially to $297 million.

The company repaid $125 million borrowings under the revolving credit facilities and $87 million of long-term obligations in the first six months of the year. However, it raised $125 million through revolving credit facilities.

In the first six months of 2021, the company generated net cash of $47 million from operating activities, down 44% from the year-ago period. Capital spending totaled $4 million, down 20%.

During the first six months of 2021, the company used $12 million for paying out dividends.

Outlook

MRC Global expects to benefit from improvement across all of its end markets including the energy transition space, through the second half of 2021 and into the next year.

MRC Global Inc. Price, Consensus and EPS Surprise

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

MRC Global Inc. price-consensus-eps-surprise-chart | MRC Global Inc. Quote

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are AZZ Inc. AZZ, Brady Corporation BRC and Donaldson Company, Inc. DCI. While AZZ currently sports a Zacks Rank #1 (Strong Buy), Brady and Donaldson carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AZZ delivered an earnings surprise of 21.24%, on average, in the trailing four quarters.

Brady delivered an earnings surprise of 1.58%, on average, in the trailing four quarters.

Donaldson delivered an earnings surprise of 9.02%, on average, in the trailing four quarters.


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