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MRC Global's Growth Scenario Bright Despite Macro Risks

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On Sep 12, 2016, we issued an updated research report on MRC Global Inc. (MRC - Free Report) .

Scopes for Improvement

MRC Global intends to drive growth on the back of superior customer relationship. The company’s products offered in the upstream, midstream and downstream markets are rare and non-imitable within the industry. The company’s advanced technologies have been boosting its existing product portfolio.

MRC Global’s products will become more competent in the market, supported by such strategies. This will aid in improving future revenues. The company also targets to enhance near-term revenues and margins, benefiting from organic as well as inorganic growth plans.

MRC Global also continues to make diligent efforts to improve its financial performance, backed by effective cost-reduction and capital-deployment strategies. The company aims to add more profitable businesses to its portfolio, expand market share, lower debt burden as well as enhance operating cash through these initiatives.

Existing Issues

Weak prices of energy resources, like oil, are currently affecting the revenues generated by manufacturing and industrial companies like MRC Global. Choppy oil prices are directly hurting the oil companies’ sales and, hence, significantly reducing the extent of Greenfield investments made within the sector. As a result, lower investments made by oil companies have depressed the sales generated by producers of steel, heavy equipment and machinery parts.

Brexit-induced political uncertainty, slow domestic demand of emerging markets like China and weak exports, have been weighing over the corporate investments to be made by companies belonging to the U.S. manufacturing as well as industrial sectors.

This, in turn, is impacting companies like MRC Global. It also sells various steel products under its tubular product category. The company’s revenues and margins remain highly sensitive to steel price and supply fluctuations. For instance, due to a dip in the price of iron ore, a major steel-making component, steel price has softened in recent times. Declining price of steel might significantly lower the company’s revenues and gross profit in the quarters ahead.

Stocks to Consider

MRC Global currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks within the industry include ACCO Brands Corp. (ACCO - Free Report) , Alarm.Com Holdings, Inc. (ALRM - Free Report) and Harsco Corp. . All the three companies presently hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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