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MRC Global (MRC) Displays Bright Prospects, Risks Persist

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MRC Global Inc. (MRC - Free Report) has been gaining from strength in end markets like upstream production, gas utilities, midstream pipelines, downstream, industrial and energy transition and others, of late. For 2022, it expects revenues from its business in the gas utility sector to witness double-digit percentage growth year over year, driven by higher gas distribution system integrity management activities. For the year, revenues from its business in the downstream, industrial and energy transition sectors are likely to increase in double-digit percentage, backed by project turnaround activity and new energy transition-related projects. For 2022, it anticipates revenues of $3.1 billion, suggesting growth of 14.9% year over year.

MRC has been benefiting from contracts with some of the largest refiners in the United States and recent developments in the energy transition project. Also, several contracts from the largest gas utilities in the United States have benefited its businesses in the gas utility sector.

The company intends to reward its shareholders through dividend payments and share buybacks. In 2021 and the first three months of 2022, MRC paid out dividends worth $24 million and $6 million, respectively. Improved cash positions will help it reward its shareholders in moving ahead.

However, rising costs and operating expenses pose a concern. In first-quarter 2022, its cost of sales increased 19.8% on a year-over-year basis, while selling, general and administrative expenses recorded an increase of 7%. Supply chain issues and increases in raw material costs are likely to continue affecting its margins and profitability.

Given its widespread presence in the international markets, MRC is exposed to unfavorable foreign currency movements. In first-quarter 2022, its revenues for the International segment declined 13% on a year-over-year basis. A stronger U.S. dollar might depress MRC's overseas business results in the quarters ahead.

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In the past three months, this Zacks Rank #3 (Hold) stock has lost 15.3% compared with the industry’s decline of 10.8%.

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