A month has gone by since the last earnings report for MRC Global (
MRC Quick Quote MRC - Free Report) . Shares have added about 4.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MRC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
MRC Global Q3 Earnings Beat, Surge Y/Y on Higher Sales
MRC Global reported third-quarter 2022 adjusted earnings (excluding 21 cents from non-recurring items) of 42 cents per share, beating the Zacks Consensus Estimate of 31 cents. The bottom line surged more than 300% year over year. Results benefited from higher sales generation and improved margins.
Total revenues of $904 million surpassed the Zacks Consensus Estimate of $885.2 million. The top line increased approximately 32% year over year, owing to growth in gas utilities and downstream, industrial and energy transition (DIET) sectors. Revenues by Product Line
Based on MRC Global’s product line, revenues from carbon pipe, fittings and flanges increased 46.7% year over year to $292 million. The same from valves, automation, measurement and instrumentation was up 26.1% from the year-ago quarter’s figure to $290 million. Gas product revenues grew 21.3% to $205 million. Sales for general products increased 23.1% to $64 million. The same for stainless steel, alloy pipe and fittings climbed 51.4% to $53 million.
Revenues by Sector
Based on the sectors served, revenues from upstream production were $176 million, up 33% from the year-ago quarter’s level. Midstream pipeline sales totaled $93 million, up 9% from the year-ago quarter’s tally, while sales for gas utilities totaled $359 million, increasing 32% year over year. DIET sales were $276 million, reflecting year-over-year growth of 40%.
Revenues by Segment
Sales generated from the U.S. segment (representing 85% of third-quarter revenues) totaled $768 million, rising 35% year over year. The results benefited from improvements in DIET, gas utilities, upstream production and midstream pipeline sectors.
Revenues from the Canada segment (4.1% of the quarter’s revenues) moved up 23% year over year to $37 million on the back of strength in the upstream production sector. Sales from the International segment (10.9% of the quarter’s revenues) increased 16% to $99 million due to strength in the DIET sector, primarily in the Netherlands, U.K. and New Zealand. Margin Profile
In the quarter under review, MRC Global’s cost of sales increased 25.2% year over year to $739 million. The adjusted gross profit in the quarter increased 44.5% year over year to $198 million. Adjusted gross margin was 21.9% in the reported quarter compared with 20% in the year-ago period. Adjusted selling, general and administrative expenses were up 17.6% year over year to $120 million. Adjusted EBITDA increased more than 100% year over year to $82 million.
Balance Sheet and Cash Flow
Exiting the third quarter, MRC Global had a cash balance of $29 million compared with $48 million at the end of December 2021. Long-term debt, net, increased to $338 million at the end of the third quarter compared with $295 million at the end of December 2021.
In the first nine months of 2022, MRC Global used net cash of $30 million from operating activities compared with $16 million of net cash generated in the year-ago period. Capital spent on purchasing property, plant and equipment was $8 million, up 33.3% year over year. In the first nine months of the current year, MRC repurchased shares worth $2 million and paid out dividends totaling $18 million. How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 76.19% due to these changes.
At this time, MRC has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise MRC has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
MRC is part of the Zacks Steel - Pipe and Tube industry. Over the past month, Valmont Industries (
VMI Quick Quote VMI - Free Report) , a stock from the same industry, has gained 4%. The company reported its results for the quarter ended September 2022 more than a month ago.
Valmont reported revenues of $1.1 billion in the last reported quarter, representing a year-over-year change of +26.3%. EPS of $3.49 for the same period compares with $2.57 a year ago.
For the current quarter, Valmont is expected to post earnings of $3.58 per share, indicating a change of +31.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Valmont has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.