MRC Global Inc. (MRC - Free Report) reported lower-than-expected results for the fourth quarter of 2018, with earnings lagging estimates by 30%. This was its third consecutive quarter of weak results.
The company’s adjusted earnings in the reported quarter were 7 cents per share, lagging the Zacks Consensus Estimate of 10 cents. However, the bottom line improved year over year. The company recorded loss of 2 cents per share in the year-ago quarter.
The year-over-year improvement came on the back of sales growth, partially offset by increase in cost of sales and income tax expenses (versus tax benefit recorded in the prior-year quarter).
Healthy Segmental Businesses Drive Revenues
In the reported quarter, MRC Global’s revenues totaled $1,009 million, reflecting year-over-year growth of 11.7%. The improvement was driven by the strengthening of the United States, Canada and International businesses. However, the top line lagged the Zacks Consensus Estimate of $1,015 million by 0.58%.
Based on the company’s product line, revenues from carbon steel pipe, fittings and flanges grew 4.2% year over year to $324 million while that from valves, automation, measurement and instrumentation increased 22.6% to $407 million, and that from gas products improved 20.4% to $136 million. However, sales for general oilfield products decreased 4% to $96 million and that for stainless steel, and alloy pipe and fittings fell 2.1% to $46 million.
Revenues from the Upstream sector were approximately $339 million, increasing 22.4% from the year-ago quarter. Midstream sales totaled $373 million, roughly 0.5% below the year-ago quarter while Downstream sales totaled $297 million, rising 18.3% year over year.
The company has three reportable segments — the U.S., Canada and International. Information on these three segments for the quarter under review is given below:
Sales generated from U.S. segment totaled $778 million, increasing 8.8% year over year. This was driven by strengthening upstream and downstream businesses, partially offset by weakness in Canada operations.
Revenues from the Canada segment grew 11.3% year over year to $79 million on the back of healthy midstream and upstream businesses. However, weakness in downstream sales affected results.
Sales from the International segment increased 29.9% to $152 million on the back of healthy upstream, midstream and downstream businesses.
For 2018, the company’s revenues totaled $4,172 million, increasing 14.4% from the year-ago tally. However, the top line lagged the Zacks Consensus Estimate of $4.18 billion.
Margin Profile Improves
In the quarter under review, MRC Global’s cost of sales increased 10% year over year to $838 million. Adjusted gross profit in the quarter increased 21% year over year to $202 million. Margin expanded 150 basis points (bps) to 20%. Selling, general and administrative expenses were flat year over year to $148 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 46.5% year over year to $63 million while adjusted EBITDA margin increased 140 bps to 6.2%. Interest expenses increased 42.9% year over year to $10 million.
Balance Sheet and Cash Flow
Exiting fourth-quarter 2018, MRC Global had a cash balance of $43 million, up 48.3% from $29 million at the end of the last reported quarter. Long-term debt balance decreased 4.9% sequentially to $680 million.
In 2018, the company used net cash of $11 million for operating activities versus $48 million used in the previous year. Capital spending totaled $20 million versus $30 million in the previous year.
During the year, the company used $125 million for repurchasing shares and $24 million for paying dividends.
MRC Global Inc. Price, Consensus and EPS Surprise
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MRC Global Inc. (MRC - Free Report) reported lower-than-expected results for the fourth quarter of 2018, with earnings lagging estimates by 30%. This was its third consecutive quarter of weak results.
The company’s adjusted earnings in the reported quarter were 7 cents per share, lagging the Zacks Consensus Estimate of 10 cents. However, the bottom line improved year over year. The company recorded loss of 2 cents per share in the year-ago quarter.
The year-over-year improvement came on the back of sales growth, partially offset by increase in cost of sales and income tax expenses (versus tax benefit recorded in the prior-year quarter).
Healthy Segmental Businesses Drive Revenues
In the reported quarter, MRC Global’s revenues totaled $1,009 million, reflecting year-over-year growth of 11.7%. The improvement was driven by the strengthening of the United States, Canada and International businesses. However, the top line lagged the Zacks Consensus Estimate of $1,015 million by 0.58%.
Based on the company’s product line, revenues from carbon steel pipe, fittings and flanges grew 4.2% year over year to $324 million while that from valves, automation, measurement and instrumentation increased 22.6% to $407 million, and that from gas products improved 20.4% to $136 million. However, sales for general oilfield products decreased 4% to $96 million and that for stainless steel, and alloy pipe and fittings fell 2.1% to $46 million.
Revenues from the Upstream sector were approximately $339 million, increasing 22.4% from the year-ago quarter. Midstream sales totaled $373 million, roughly 0.5% below the year-ago quarter while Downstream sales totaled $297 million, rising 18.3% year over year.
The company has three reportable segments — the U.S., Canada and International. Information on these three segments for the quarter under review is given below:
Sales generated from U.S. segment totaled $778 million, increasing 8.8% year over year. This was driven by strengthening upstream and downstream businesses, partially offset by weakness in Canada operations.
Revenues from the Canada segment grew 11.3% year over year to $79 million on the back of healthy midstream and upstream businesses. However, weakness in downstream sales affected results.
Sales from the International segment increased 29.9% to $152 million on the back of healthy upstream, midstream and downstream businesses.
For 2018, the company’s revenues totaled $4,172 million, increasing 14.4% from the year-ago tally. However, the top line lagged the Zacks Consensus Estimate of $4.18 billion.
Margin Profile Improves
In the quarter under review, MRC Global’s cost of sales increased 10% year over year to $838 million. Adjusted gross profit in the quarter increased 21% year over year to $202 million. Margin expanded 150 basis points (bps) to 20%. Selling, general and administrative expenses were flat year over year to $148 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 46.5% year over year to $63 million while adjusted EBITDA margin increased 140 bps to 6.2%. Interest expenses increased 42.9% year over year to $10 million.
Balance Sheet and Cash Flow
Exiting fourth-quarter 2018, MRC Global had a cash balance of $43 million, up 48.3% from $29 million at the end of the last reported quarter. Long-term debt balance decreased 4.9% sequentially to $680 million.
In 2018, the company used net cash of $11 million for operating activities versus $48 million used in the previous year. Capital spending totaled $20 million versus $30 million in the previous year.
During the year, the company used $125 million for repurchasing shares and $24 million for paying dividends.
MRC Global Inc. Price, Consensus and EPS Surprise
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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