Back to top

Image: Bigstock

Here's Why You Should Avoid Betting on Macquarie (MIC) Stock

Read MoreHide Full Article

Macquarie Infrastructure Company (MIC - Free Report) failed to impress investors with its recent operational performance, due to difficult end-market conditions amid the coronavirus outbreak and other woes, which are expected to adversely impact earnings.

The Zacks Rank #4 (Sell) company has a market capitalization of $3 billion. In the past six months, the stock has gained 14.2% compared with the industry’s growth of 32.5%.

Let’s delve into the factors that might continue to take a toll on the firm.

Weak Demand Environment: Macquarie reported disappointing third-quarter 2020 results, with earnings and revenues declining 56.1% and 29.6% on a year-over-year basis, respectively.  The decline was attributable to a lackluster performance across its Atlantic Aviation and MIC Hawaii segments, thanks to weak end-market conditions. Despite partial recovery, low general aviation flight activity due to the travel limitations implemented amid the coronavirus outbreak will likely continue to affect the demand for products and services provided by the company’s Atlantic Aviation and MIC Hawaii segments in the quarters ahead. This is likely to have an adverse impact on top-line performance, going forward.

High Debt Profile:  The company’s high-debt profile poses a concern. In six years (2014-2019), its long-term debt (net of current portion) rose 4.7% (CAGR). The metric was $1,705 million at the end of the third quarter of 2020, up 9.7% from 2019-end levels. Also, its cash and cash equivalents of $429 million (exiting the third quarter) do not seem impressive, considering its high debt profile. Further, increase in debt levels can raise the company’s financial obligations.

High Capital Expenditures: Macquarie deployed about $211 million and $154 million of capital, supporting growth investments in 2019 and in the first nine months of 2020, respectively. Although its expansion initiatives hold good for long-term growth, high capital expenditures might put pressure on the company's profitability in the near term.

Stocks to Consider

Some better-ranked stocks from the same space are Crane Company (CR - Free Report) , ITT Inc. (ITT - Free Report) and Danaher Corporation (DHR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Crane has a trailing-four quarter earnings surprise of 14.59%, on average.

ITT has a trailing four-quarter earnings surprise of 22.39%, on average.

Danaher has a trailing four-quarter earnings surprise of 17.00%, on average.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>

Published in