MRC Global Inc. ( MRC Quick Quote MRC - Free Report) reported better-than-expected first-quarter 2021 results. Its bottom line surpassed estimates by 22.2%, while sales exceeded the same by 8%. Notably, the quarter’s earnings beat represents the fifth consecutive quarter of impressive results. Reduced customer spending due to the pandemic adversely impacted earnings. The company reported an adjusted loss of 7 cents per share in the quarter against the year-ago earnings of 4 cents. The Zacks Consensus Estimate was pegged at a loss of 9 cents. Revenue Details
In the reported quarter, MRC Global’s revenues totaled $609 million, reflecting a year-over-year decline of 23.3%. The results suffered from weakness across all segments, product lines and sectors served. It must be noted here that only gas utilities’ sales expanded on a year-over-year basis in the quarter.
However, the company’s revenues surpassed the Zacks Consensus Estimate of $564 million. Based on MRC Global’s product line, revenues from carbon pipe, fittings and flanges declined 30.2% year over year to $150 million, and that from valves, automation, measurement and instrumentation decreased 25.4% to $241 million, while that from gas products were relatively flat at $134 million. Sales for general products fell 35.3% to $55 million, and that for stainless steel, and alloy pipe and fittings declined 21.6% to $29 million. Based on the sectors served, revenues from the Upstream production were approximately $127 million, declining 42.7% from the year-ago quarter. Midstream pipeline sales totaled $78 million, down 34.5%, and Gas utilities sales totaled $210 million, increasing 4% year over year. Downstream & industrial sales were $194 million, reflecting a decline of 22.7%. The company has three reportable segments — the U.S., Canada and International. It noted that the results of the segments suffered from the adverse impacts of the coronavirus outbreak. Further information is given below: Sales generated from the U.S. segment (representing 79.5% of the company’s first-quarter revenues) totaled $484 million, declining 24% year over year. The results were adversely impacted by weakness in spending in the downstream & industrial, upstream production, and midstream pipeline sectors. However, market share gains and customers’ increasing activity levels in the Gas utilities sector boosted results. Revenues from the Canada segment (5.3% of the quarter’s revenues) moved down 36% year over year to $32 million due to the pandemic-related weakness in the upstream production sector. Sales from the International segment (18.6% of the quarter’s revenues) declined 12% to $93 million. The results were adversely impacted by weakness in customer spending. However, foreign currency translation had a favorable impact on results. Margin Profile
In the quarter under review, MRC Global’s cost of sales declined 21.7% year over year to $506 million. Adjusted gross profit in the quarter moved down 24.8% to $118 million. Margin was 19.4% in the reported quarter compared with 19.8% in the year-ago quarter. Adjusted selling, general and administrative expenses were down 22.2% to $98 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 29.4% year over year to $24 million, while adjusted EBITDA margin was down 40 basis points to 3.9%. Interest expenses declined 25% year over year to $6 million. Balance Sheet and Cash Flow
Exiting first-quarter 2021, MRC Global’s cash balance improved to $132 million from the previous quarter’s balance of $119 million. Long-term debt grew 0.8% sequentially to $382 million.
Notably, the company repaid $2 million borrowings under the revolving credit facilities and $1 million of long-term obligations in the year. However, it raised $2 million through revolving credit facilities. In the first three months of 2021, the company generated net cash of $24 million from operating activities, down 35.1% from the year-ago period. Capital spending totaled $2 million, flat year over year. During the first three months of 2021, the company used $6 million for paying out dividends. Outlook
MRC Global believes that healthy liquidity, improvement in the end markets and favorable cost structure will be beneficial in the quarters ahead.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks are Alcoa Corporation ( AA Quick Quote AA - Free Report) , Lakeland Industries, Inc. ( LAKE Quick Quote LAKE - Free Report) and Energy Recovery, Inc. ( ERII Quick Quote ERII - Free Report) . While Alcoa and Lakeland Industries currently sport a Zacks Rank #1 (Strong Buy), Energy Recovery carries a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here Alcoa delivered a positive earnings surprise of 56.78%, on average, in the trailing four quarters. Lakeland Industries delivered a positive earnings surprise of 230.73%, on average, in the trailing four quarters. Energy Recovery delivered a positive earnings surprise of 232.08%, on average, in the trailing four quarters. Zacks Names “Single Best Pick to Double”
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