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Can Aegion (AEGN) Spring a Surprise this Earnings Season?

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Aegion Corporation (AEGN - Free Report) is scheduled to report fourth-quarter 2016 results on Feb 28, after market close. The company posted a year-over-year decline in both earnings and sales in third-quarter 2016. Last quarter, Aegion posted a negative earnings surprise of 11.11%.

Let’s see how things are shaping up for this announcement.

Factors At Play

Per Aegion’s preliminary update on fourth-quarter 2016 performance, Aegion expects the to-be-reported quarter’s revenues to be hurt by $10 million, with a corresponding impact on gross margins. The impact is likely due to the reduction in volume to cover fixed costs. Top line in the quarter will also be affected due to adverse weather conditions in the U.S. and Canada.

Aegion Corp Price and EPS Surprise


Aegion Corp Price and EPS Surprise | Aegion Corp Quote

In the fourth quarter, the company expects a marginal decline in operating income in the Corrosion Protection segment. The fall is attributed to challenges in the upstream market along with the absence of revenues and profit contributions from the Canadian pipe coating joint venture, sold in Feb 2016.

Apart from normal seasonality, Aegion may experience significant quarter-to-quarter and year-over-year swings, based on the timing of contracts due to weather, permit, or other issues. Further, execution issues on individual projects may affect its results.

Aegion’s Infrastructure Solutions segment is well-positioned for the fourth quarter due to a strong outlook in the N.A. wastewater cured-in-place pipe or CIPP market as well as certain international markets. Expected contributions from Underground Solutions will also drive results.

Further, backlog for cathodic protection services primarily in North America, remained high, and bodes well for fourth-quarter performance. The company anticipates improved operating margins in the Energy segment in fourth-quarter 2016 backed by current U.S.

Share Price Performance

In the last one year, Aegion has underperformed the Zacks classified Building & Construction Production-Miscellaneous sub industry with respect to price performance. While the stock gained 26.6%, the industry recorded growth of 38.8%, over the same time frame.

Earnings Whispers

Our proven model does not conclusively show that Aegion is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: The Earnings ESP for Aegion is 0.00%. This is because the Most Accurate estimate of 34 cents is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Aegion currently carries Zacks Rank #3. Although this increases the predictive power of ESP, the company’s 0.00% ESP makes an earnings prediction uncertain.

Concurrently, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Burlington Stores, Inc. (BURL - Free Report) has a positive Earnings ESP of +1.18% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AECOM (ACM - Free Report) has an Earnings ESP of +1.41% and a Zacks Rank #3.

Headwaters Incorporated has an Earnings ESP of +13.33% and a Zacks Rank #3.

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