Aegion Corporation has been disappointing investors of late given that the shares of this global leader in infrastructure protection and maintenance have yielded a negative return of 7.2% year to date. Should investors dump this stock from their portfolio? Let’s find out.

Estimates Moving South

Estimates for the company for fiscal 2017 and fiscal 2018 have moved south in the past 90 days, reflecting the negative outlook of analysts. For fiscal 2017, the estimate has dropped 9% to $1.33 per share and for fiscal 2018 the same has dipped 2% to $1.41.

Price Performance



Aegion has underperformed the Zacks categorized Building Products - Miscellaneous subindustry with respect to price performance in the past two years. The stock has gained 19.8% while the industry increased 29.6%.

Unfavorable Zacks Rank, Score

Aegion currently carries a Zacks Rank #4 (Sell) and a VGM score of “C”. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners.

Expensive Valuation

Aegion's trailing 12-month price earnings (P/E) ratio is 19.1 while the Zacks categorized Building & Construction Product- Miscellaneous Sub-Industry's average trailing 12-months P/E ratio is lower at 17.6. This implies that the stock is overvalued.

Near-Term Headwinds Remain

Aegion has been actively executing its strategic plans to make important internal investments, in a bid to access new markets in North America, fund future innovations, boost sales capabilities and introduce services such as asset integrity program. However, these efforts will escalate operating expenses in 2017 above normal inflationary increases. The company anticipates operating expenses to flare up across all segments.

Aegion believes that the CIPP (Cured-in-place pipe) rehabilitation market in North America will grow by low-single digits in 2017. However, dismal condition of the U.S. water and wastewater infrastructure remains a concern. While the new administration in Washington will provide support for water and wastewater pipeline rehabilitation, the long-term need to rehabilitate municipal pipelines will remain an issue. Also, low oil prices have led to a weaker upstream oil & gas environment, affecting the results.

Key Picks

Some better-ranked stocks worth considering in the same sector are Boise Cascade Company (BCC Quick QuoteBCC - Free Report) , TopBuild Corp. (BLD Quick QuoteBLD - Free Report) and NCI Building Systems, Inc. . All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boise Cascade has an average positive earnings surprise of 114.74% in the trailing four quarters. Its shares have gained 30.2% year to date. TopBuild delivered an average positive earnings surprise of 5.98% in the trailing four quarters and its shares clocked a 49.9% gain year to date. NCI Building Systems has an average positive earnings surprise of 11.28%. The company’s shares have risen 9.9% year to date.

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