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MRC Global Inc. (MRC - Analyst Report) reported disappointing fourth-quarter 2013 results. Adjusted earnings per share in the quarter came in at 32 cents, missing the Zacks Consensus Estimate of 42 cents by 23.8%. The adjusted earnings for the quarter also lagged the year-ago earnings of 55 cents due primarily to reduced margins.

On a GAAP basis, earnings per share for the quarter were 23 cents, which compared favorably with a loss of 6 cents in the year-ago quarter.

In 2013, adjusted earnings per share came in at $1.60, down from $2.02 in 2012. Reported earnings also missed the Zacks Consensus Estimate of $1.70 per share.

Revenues

MRC Global reported 2.9% year-over-year increase in revenues to $1,344.2 million, beating the Zacks Consensus Estimate of $1,310.0 million. The increase in revenues was primarily due to the contribution from acquisitions including Production Specialty Services Inc., Flow Control Products and Flangefitt Stainless Ltd.

Geographically, MRC Global reported 6% year-over-year increase in revenues in the U.S. to $1.01 billion. Revenues received a boost from the acquisition of Production Specialty and Flow Control Products. Also, sales in the gas utility and line pipe product lines increased.

In Canada, revenues generated were $189.3 million, down 10.6% from the year-ago quarter due to declining project sales and a weak Canadian dollar. Additionally, growth in Europe and Asia increased the International sales by 1.8% year over year to $143.1 million. However, revenues were pulled down slightly by a decline in the Australasia region sales.

On a sector basis, upstream sales increased 5.5% year over year to $606.0 million. Midstream sales increased 7.2% year over year to $392.2 million. Downstream sales in the quarter were $346.0 million, down 5.6% year over year.

In 2013, the company recorded revenues of $5.2 billion, down from $5.6 billion in 2012. Revenues were in line with the Zacks Consensus Estimate.

Margins/Costs

Cost of sales in the fourth quarter went up 6.7% year over year to $1,118.2 million and represented 83.2% of the total revenue, up from 80.2% in the year-ago quarter. Selling, general and administrative expenses, as a percentage of total revenue, came in at 12.4%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $87.2 million, down from $99.2 million in the fourth quarter of 2012.

Balance Sheet

Exiting 2013, cash balance of MRC Global stood at $25.2 million, down from $33.4 million in the previous quarter. Long-term debt, net of current portion, declined sequentially to $978.9 million from $1,037.3 million.

Cash Flow

For 2013, MRC Global generated cash from operations of $323.6 million versus $240.1 million in the prior year. Capital expenditure incurred in 2013 totaled $22.1 million, versus $26.2 million in the year-ago period.

Outlook

For 2014, management anticipates revenues to range within $5.5–$5.8 billion. Adjusted EBITDA is predicted within $400–$450 million, while capital expenditure is expected in the band of $25.0 to $30.0 million. Also, MRC Global is expected to generate cash flow from operations in $175.0 to $200.0 million range.

MRC Global is a leading global distributor of pipe, valves and fittings, and related products and services to the energy and industrial sectors. The company currently carries a Zacks Rank #4 (Sell). Other stocks in the industry worth considering include The Middleby Corp. (MIDD - Analyst Report), Altra Industrial Motion Corp. (AIMC - Snapshot Report) and Graco Inc. (GGG - Snapshot Report). All these carry a Zacks Rank #2 (Buy).

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