MRC Global Inc. MRC has failed to impress investors with its recent operational performance due to rising operating costs, supply chain constraints and foreign currency headwinds. These factors are likely to impede the company’s earnings in the quarters ahead.
Let’s discuss the factors that might continue taking a toll on the Zacks Rank #5 (Strong Sell) firm.
Increasing Costs and Expenses: MRC Global has been dealing with the adverse impacts of high cost of sales (due to raw material cost inflation). In the first six months of 2023, the cost of sales increased 7.6% year over year. Selling, general and administrative expenses climbed 11.1% in the same period due to higher employee-related costs and associated benefit costs. Escalating costs pose a threat to MRC’s bottom line. Also, difficulties in securing drilling permits and the regulatory framework, which are unfavorable for the oil and gas industry, are affecting the company’s PTI business.
Supply Chain Constraint: While the situation has improved, supply chain disruptions remain a major challenge for MRC Global. The company is facing supply chain constraints for component parts, particularly valves and meters. Labor constraints, arising from the post-pandemic improvement of employment rates and increased competition among companies to attract and retain employees, are also worrisome for the company in the quarters ahead.
Forex Woes: Given its widespread presence in international markets, MRC Global is exposed to unfavorable foreign currency movements. In second-quarter 2023, the weakening of the Canadian dollar relative to the U.S. dollar unfavorably impacted Canada’s sales by $2 million. Foreign exchange headwinds adversely impacted International sales by $3 million.
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for MRC’s 2023 earnings has been revised 11.1% downward.
MRC Global Inc. Price and Consensus
MRC Global Inc. price-consensus-chart | MRC Global Inc. Quote
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Some better-ranked companies from the Industrial Products sector are discussed below:
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A. O. Smith Corp. AOS presently carries a Zacks Rank #2. AOS’ earnings surprise in the last four quarters was 10.5%, on average.
In the past 60 days, estimates for A. O. Smith’s earnings have increased by 2.9% for 2023. The stock has gained 30.2% in the past year.
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