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Zacks Investment Research downgraded MRC Global Inc. (MRC - Analyst Report) to a Zacks Rank #5 (Strong Sell) on Sep 5, based on weak second-quarter 2013 results and a weak outlook.

Why the Downgrade?

MRC Global reported weak top-line results for the second quarter of 2013, with revenues declining 11.4% year over year to settle at $1,267.8 million. Revenues also missed the Zacks Consensus Estimate of $1,299.0 million. The decline was primarily due to weakness in the U.S. upstream and midstream sectors as well as planned reduction in oil country tubular goods business.

Additionally, MRC Global experienced a year-over-year rise in operating expenses for the second quarter of 2013, due to the acquisition of Production Specialty Services, Inc. in December last year.

MRC Global also experienced a reduction in sales in Canada, led by a longer spring break-up in 2013. International sales declined roughly 8% year over year to $139.0 million in the second quarter of 2013. The reduction in International sales was primarily a result of weaker demand in Australia, due to reduction in spending in the mining and oil and gas sector.

Due to lower revenues in the quarter, management has revised its expectations for 2013 downwards. For the year, management now expects revenues to range within $5.10 billion–$5.30 billion versus $5.75 billion–$5.95 billion as expected earlier. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is predicted to be within $385 million–$415 million down from $480 million–$510 million as expected earlier, while earnings per share are expected in the range of $1.65–$1.85 versus the prior guidance of $2.10–$2.30.

Other Stocks to Consider

MRC Global primarily engages in the distribution of pipes, valves, and fittings (PVF), and related products and services to the energy industry worldwide. The company currently has a $2.65 billion market capitalization.

Other stocks to watch out for in the industry are NN Inc. (NNBR - Snapshot Report), Valmont Industries, Inc. (VMI - Analyst Report) and Kaydon Corporation . While NN Inc. carries a Zacks Rank #1 (Strong Buy), Valmont and Kaydon Corp. carry a Zacks Rank #2 (Buy).

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