We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
MRC Global (MRC) Benefits From Contract Wins, Risks Persist
Read MoreHide Full Article
On Jul 13, we issued an updated research report on MRC Global Inc. (MRC - Free Report) .
In the past three months, this Zacks Rank #3 (Hold) stock has gained 18.7% compared with the industry’s growth of 2.6%.
Existing Business Scenario
MRC Global has been benefiting from contract wins and projects over some time. For instance, it secured new contracts from Noble Midstream and Ameren in the first quarter of 2020. Also, the company clinched a renewed contract from Eversource. Notably, MRC Global generated roughly 55% of 2019 revenues from its top 25 customers. In addition, some of the multiple-year contracts, including those signed with Exxon Mobile and others, have been proving beneficial.
Also, the company remains focused on cash flow generation and managing balance sheet apart from lowering operating costs. For instance, in 2020, it expects to generate cash flow of $200 million from operating activities compared with $110 million mentioned earlier. In addition, it expects to lower selling, general and administrative expenses from $550 million in 2019 to $470 million in 2020. Also, adjusted gross margin in 2020 is likely to be 19.8%, suggesting an increase from 19.5% recorded in 2019.
However, the company’s highly leveraged balance sheet remains concerning. Notably, its long-term debt in the last three years (2017-2019) increased 10% (CAGR). Exiting the first quarter, the metric, remained high at $517 million. In addition, its ability to meet its debt obligations based on its current income has declined over the past quarter. Notably, at the end of the first quarter, its times interest earned ratio stood at 2.5, lower than 2.7 recorded at the end of the previous quarter.
Moreover, low customer demand environment, weakness in the oil & gas industry, storage capacity constraints, and unfavorable commodity price environment remain concerning for the company. Moving ahead, softness across the Permian basin projects (Upstream revenues declined 43% in the first quarter of 2020) will likely continue to hurt its top-line performance.
Valmont delivered a positive earnings surprise of 3.95%, on average, in the trailing four quarters.
Chart Industries delivered a positive earnings surprise of 1.41%, on average, in the trailing four quarters.
CECO Environmental delivered a positive earnings surprise of 23.57%, on average, in the trailing four quarters.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
MRC Global (MRC) Benefits From Contract Wins, Risks Persist
On Jul 13, we issued an updated research report on MRC Global Inc. (MRC - Free Report) .
In the past three months, this Zacks Rank #3 (Hold) stock has gained 18.7% compared with the industry’s growth of 2.6%.
Existing Business Scenario
MRC Global has been benefiting from contract wins and projects over some time. For instance, it secured new contracts from Noble Midstream and Ameren in the first quarter of 2020. Also, the company clinched a renewed contract from Eversource. Notably, MRC Global generated roughly 55% of 2019 revenues from its top 25 customers. In addition, some of the multiple-year contracts, including those signed with Exxon Mobile and others, have been proving beneficial.
Also, the company remains focused on cash flow generation and managing balance sheet apart from lowering operating costs. For instance, in 2020, it expects to generate cash flow of $200 million from operating activities compared with $110 million mentioned earlier. In addition, it expects to lower selling, general and administrative expenses from $550 million in 2019 to $470 million in 2020. Also, adjusted gross margin in 2020 is likely to be 19.8%, suggesting an increase from 19.5% recorded in 2019.
However, the company’s highly leveraged balance sheet remains concerning. Notably, its long-term debt in the last three years (2017-2019) increased 10% (CAGR). Exiting the first quarter, the metric, remained high at $517 million. In addition, its ability to meet its debt obligations based on its current income has declined over the past quarter. Notably, at the end of the first quarter, its times interest earned ratio stood at 2.5, lower than 2.7 recorded at the end of the previous quarter.
Moreover, low customer demand environment, weakness in the oil & gas industry, storage capacity constraints, and unfavorable commodity price environment remain concerning for the company. Moving ahead, softness across the Permian basin projects (Upstream revenues declined 43% in the first quarter of 2020) will likely continue to hurt its top-line performance.
Stocks to Consider
Some better-ranked stocks from the Zacks Industrial Products sector are Valmont Industries, Inc. (VMI - Free Report) , Chart Industries, Inc. (GTLS - Free Report) and CECO Environmental Corp. . While Valmont currently sports a Zacks Rank #1 (Strong Buy), Chart Industries and CECO Environmental carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Valmont delivered a positive earnings surprise of 3.95%, on average, in the trailing four quarters.
Chart Industries delivered a positive earnings surprise of 1.41%, on average, in the trailing four quarters.
CECO Environmental delivered a positive earnings surprise of 23.57%, on average, in the trailing four quarters.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>