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MRC Global (MRC) Q3 Earnings Beat Estimates, Sales Miss

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MRC Global Inc. (MRC - Free Report) reported mixed results for the third quarter of 2021. Its earnings surpassed estimates by 80%, while sales lagged the same by 2.66%. Notably, the quarter’s earnings beat is the seventh consecutive quarter of impressive results.

The company reported adjusted earnings of 9 cents per share in the quarter, beating the Zacks Consensus Estimate of 5 cents. On a year-over-year basis, earnings improved from a loss of 10 cents recorded in the year-ago quarter.

Revenue Details

In the reported quarter, MRC Global’s revenues totaled $685 million, reflecting year-over-year growth of 17.1%. The results benefitted from the healthy business in the U.S. and Canada segments, partially offset by weakness in the International segment.

The company’s revenues lagged the Zacks Consensus Estimate of $704 million.

Based on MRC Global’s product line, revenues from carbon pipe, fittings and flanges increased 43.2% year over year to $199 million. The same from valves, automation, measurement and instrumentation was unchanged year over year at $230 million. Gas product revenues grew 29% to $169 million. Sales for general products fell 7.1% to $52 million. The same for stainless steel, and alloy pipe and fittings grew 20.7% to $35 million.

Based on the sectors served, revenues from the Upstream production were $132 million, increasing 11.9% from the year-ago quarter. Midstream pipeline sales totaled $85 million, up 14.9% from the year-ago quarter, and sales for Gas utilities totaled $271 million, increasing 30.3% year over year. Downstream, industrial & energy transition (“DIET”) sales were $197 million, reflecting year-over-year growth of 6.5%.

The company has three reportable segments — the U.S., Canada and International. Further information is given below:

Sales generated from the U.S. segment (representing 83.2% of the company’s third-quarter revenues) totaled $570 million, increasing 23.1% year over year. The results benefitted from improvements in DIET, upstream production, midstream pipeline, and gas utilities sectors.

Revenues from the Canada segment (4.4% of the quarter’s revenues) moved up 11.1% year over year to $30 million on the back of healthy DIET sales and strengthening Canadian dollar.

Sales from the International segment (12.4% of the quarter’s revenues) declined 10.5% to $85 million due to project-timing uncertainties. Stronger currencies boosted results.

Margin Profile

In the quarter under review, MRC Global’s cost of sales increased 25.3% year over year to $590 million. Adjusted gross profit in the quarter increased 19.1% year over year to $137 million. Margin at 20% grew 30 basis points (bps) year over year. Adjusted selling, general and administrative expenses were up 5.2% year over year to $102 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 62.5% year over year to $39 million, while adjusted EBITDA margin was up 160 bps at 5.7%. Interest expenses declined 14.3% year over year to $6 million.

Balance Sheet and Cash Flow

Exiting third-quarter 2021, MRC Global’s cash balance decreased 25.4% sequentially to $47 million. Long-term debt increased 8.8% sequentially to $323 million.

In the first three quarters of 2021, the company repaid $262 million borrowings under the revolving credit facilities and $87 million of long-term obligations. However, it raised $290 million through revolving credit facilities.

In the first three quarters of 2021, the company generated net cash of $16 million from operating activities, down 91% from the year-ago period. Capital spending totaled $6 million, down from $8 million in the first three quarters of 2020.

Outlook

Improvement in customer activities and growth in backlog are predicted to be beneficial in 2022. Revenues are expected to grow in double-digits in the year.

MRC Global Inc. Price, Consensus and EPS Surprise

 

MRC Global Inc. Price, Consensus and EPS Surprise

MRC Global Inc. price-consensus-eps-surprise-chart | MRC Global Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $749.8 million, MRC Global currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the Zacks Industrial Products sector are Casella Waste Systems, Inc. (CWST - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) , and Tetra Tech, Inc. (TTEK - Free Report) . While Casella Waste currently sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Tetra Tech carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimates for these stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 25.93for Casella Waste, 14.29% for Applied Industrial and 9.20% for Tetra Tech.