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Reasons Why You Should Avoid Betting on MRC Global (MRC)
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MRC Global Inc. (MRC - Free Report) has failed to impress investors with its recent operational performance due to weakness across its businesses and high debt levels.
Based in Houston, TX, MRC Global is one of the leading distributors of pipes, valves and fittings, and related products and services. The company’s products are used across upstream, midstream and downstream sectors of the oil and gas industry. Its products serve industries such as exploration, production and extraction of underground oil and natural gas, natural gas utilities, crude oil refining, petrochemical processing and general industries. MRC currently carries a Zacks Rank #5 (Strong Sell).
Let’s discuss the factors that may continue taking a toll on the firm.
Factors Affecting MRC
Business Weakness: MRC Global has been witnessing weakness in the Gas Utilities and Production & Transmission Infrastructure (PTI) sectors. Continued customer destocking is affecting the Gas Utilities sector. Also, higher interest rates and inflation in construction costs are causing customers to delay project activity. Decreases in rig counts in the U.S. oil field due to the widespread consolidation of producers, particularly in the Permian Basin, and low natural gas prices are affecting the PTI sector.
Amid these challenges, the company expects its third-quarter revenues to decline in mid-single-digits, followed by the potential for a modest seasonal decline in the fourth quarter. The total revenues in the second half of 2024 are anticipated to be down in low-single-digits compared with the first half of the year.
Increasing Debt Level: High debt levels raise financial obligations and may hurt MRC Global’s profitability. The company exited the second quarter with a long-term debt of $152 million, higher than $9 million reported at the end of fourth-quarter 2023. Shares of the company have lost 4.6% in the past three months. MRC belongs to the Zacks Steel - Pipe and Tube industry.
Image Source: Zacks Investment Research
Forex Woes: With MRC Global’s operations spread globally, its performance is exposed to risks arising from geopolitical issues, trade relations, adverse movement in foreign currencies and governmental policies. Also, as the Federal Reserve maintains a tight monetary policy to curb inflation, a slowdown in the manufacturing sector and a general softness in demand raise concerns for the company’s near-term prospects. Recession fears and sluggishness in the economy depict an uncertain picture for all corporations and MRC Global is no exception.
Stocks to Consider
Better-ranked companies from the same space are discussed below.
MWA delivered a trailing four-quarter average earnings surprise of 64.1%. In the past 60 days, the Zacks Consensus Estimate for Mueller Water’s fiscal 2024 earnings has increased 17.7%.
Crane Company (CR - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 1.6%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%.
In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has remained steady.
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Reasons Why You Should Avoid Betting on MRC Global (MRC)
MRC Global Inc. (MRC - Free Report) has failed to impress investors with its recent operational performance due to weakness across its businesses and high debt levels.
Based in Houston, TX, MRC Global is one of the leading distributors of pipes, valves and fittings, and related products and services. The company’s products are used across upstream, midstream and downstream sectors of the oil and gas industry. Its products serve industries such as exploration, production and extraction of underground oil and natural gas, natural gas utilities, crude oil refining, petrochemical processing and general industries. MRC currently carries a Zacks Rank #5 (Strong Sell).
Let’s discuss the factors that may continue taking a toll on the firm.
Factors Affecting MRC
Business Weakness: MRC Global has been witnessing weakness in the Gas Utilities and Production & Transmission Infrastructure (PTI) sectors. Continued customer destocking is affecting the Gas Utilities sector. Also, higher interest rates and inflation in construction costs are causing customers to delay project activity. Decreases in rig counts in the U.S. oil field due to the widespread consolidation of producers, particularly in the Permian Basin, and low natural gas prices are affecting the PTI sector.
Amid these challenges, the company expects its third-quarter revenues to decline in mid-single-digits, followed by the potential for a modest seasonal decline in the fourth quarter. The total revenues in the second half of 2024 are anticipated to be down in low-single-digits compared with the first half of the year.
Increasing Debt Level: High debt levels raise financial obligations and may hurt MRC Global’s profitability. The company exited the second quarter with a long-term debt of $152 million, higher than $9 million reported at the end of fourth-quarter 2023. Shares of the company have lost 4.6% in the past three months. MRC belongs to the Zacks Steel - Pipe and Tube industry.
Image Source: Zacks Investment Research
Forex Woes: With MRC Global’s operations spread globally, its performance is exposed to risks arising from geopolitical issues, trade relations, adverse movement in foreign currencies and governmental policies. Also, as the Federal Reserve maintains a tight monetary policy to curb inflation, a slowdown in the manufacturing sector and a general softness in demand raise concerns for the company’s near-term prospects. Recession fears and sluggishness in the economy depict an uncertain picture for all corporations and MRC Global is no exception.
Stocks to Consider
Better-ranked companies from the same space are discussed below.
Mueller Water Products, Inc. (MWA - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MWA delivered a trailing four-quarter average earnings surprise of 64.1%. In the past 60 days, the Zacks Consensus Estimate for Mueller Water’s fiscal 2024 earnings has increased 17.7%.
Crane Company (CR - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 1.6%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%.
In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has remained steady.