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MRC Global (MRC) Reports Narrower-than-Expected Q3 Loss

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MRC Global Inc. (MRC - Free Report) posted third-quarter 2016 loss of 48 cents per share or loss of 6 cents excluding severance, non-cash inventory and restructuring after-tax charges of 42 cents. The adjusted loss was narrower than the Zacks Consensus Estimate of a loss of 15 cents. The company had reported adjusted earnings of 10 cents per share in the year-ago comparable period.

Revenues

MRC Global’s revenues plunged 26% year over year to $793 million. The year-over-year decline was primarily attributable to reduced customer spending across all sectors and segments of the company due to weak natural gas and oil prices.

However, the top line surpassed the Zacks Consensus Estimate of $759 million.

Performance of the Segments

MRC Global’s third-quarter sales in the U.S. totaled $590 million, down 32% year over year. The decline mainly stemmed from lower sales by the company’s upstream, midstream and downstream sectors.

International sales were $133 million, down 2% year over year due to lower downstream sales.

Revenues from Canada were $70 million, roughly flat year over year. Rise in midstream sales balanced the decline in upstream sales.

Revenues by Sector

For the reported quarter, upstream sales plummeted 41% year over year to $224 million. Weak customer activity resulted in the year-over-year deterioration.

Midstream sales totaled $327 million in the third quarter, down 12% year over year. The company’s midstream sales decreased due to soft demand accrued from the transmission customers.

The company’s third-quarter downstream sales decreased 25% year over year to $242 million. The year-over-year decline was primarily attributable to poor project activity.

Margins & Costs

Adjusted gross profit margin was 13%, down from 17.7% in the year-ago quarter. Selling, general and administrative expenses were $124 million as against $142 million a year ago. Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) totaled $24 million compared with $51 million in the prior-year quarter.

Balance Sheet & Cash Flow

MRC Global exited the third quarter with cash balance of $213 million as against $69 million as of Dec 31, 2015. At the end of the quarter, the company’s long-term debt, net of current portion, decreased to $507 million from $511 million at year-end 2015.

At the end of first nine months of 2016, MRC Global generated $230 million of cash from operating activities compared with $481 million in the year-ago quarter. Total capital expenditure remained flat year over year at $24 million.  

During third-quarter 2016, MRC Global repurchased its common stock worth $17 million, at an average price of $14.92 per share.  

Outlook

Despite unfavorable market conditions, MRC Global expects to improve its business on the back of superior customer relationships, working capital optimization, operational expense management and balance sheet strengthening.

MRC GLOBAL INC Price, Consensus and EPS Surprise

 

MRC GLOBAL INC Price, Consensus and EPS Surprise | MRC GLOBAL INC Quote

Zacks Rank and Stocks to Consider

MRC Global currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks within the industry that warrant a look include:

ACCO Brands Corporation (ACCO - Free Report) currently carries a Zacks Rank #1. the company delivered an average positive earnings surprise of 23.93% over the four trailing quarters.

Applied Industrial Technologies, Inc. (AIT - Free Report) currently carries a Zacks Rank #2 (Buy). It posted  an average positive earnings surprise of 4.93% over the last four quarters.

AO Smith Corp. (AOS - Free Report) currently carries a Zacks Rank #2. The company posted an average positive earnings surprise of 6.45% over the trailing four quarters.

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