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Aegion (AEGN) Lags Q1 Earnings by a Penny, Tops Revenues
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Aegion Corporation reported first-quarter 2017 adjusted earnings of 18 cents per share, up around 50% year over year. Earnings, however, missed the Zacks Consensus Estimate of 19 cents. Including one-time items, Aegion reported profit of 17 cents per share in the quarter compared to a loss of 11 cents recorded in the prior-year quarter.
Operational Update
Total revenue of $325 million in the quarter increased 10.6% year over year. Revenues beat the Zacks Consensus Estimate of $319 million.
Adjusted cost of sales increased 8% to $257.6 million from $238 million in the year-ago quarter. Adjusted gross profit improved 21% to $67.6 million from $55.7 million in the prior-year quarter. Adjusted gross margin contracted 280 basis points (bps) year over year to 26.2%.
Adjusted operating expenses climbed 10% year over year to $53 million. Adjusted operating income increased nearly two-fold to $14.6 million. Operating margin in the quarter came in at 5.7%, expanding 250 bps from the year-ago quarter.
Segmental Performance
Revenues from the Infrastructure Solutions segment climbed 2.5% year over year to $128.9 million. The segment’s adjusted operating income plunged 39.5% year over year to $6.1 million due to limited activity in certain regions and planned investments for future growth.
The Corrosion Protection segment’s revenues rose 33.5% to $123.4 million from $92.4 million in the comparable quarter last year, driven by execution of the large deepwater pipe coating and insulation project. The segment reported an adjusted operating profit of $7.2 million compared to a loss of $2.9 million in the year-ago quarter.
Revenues in the Energy Services segment declined 3.7% year over year to $73 million. The segment reported an adjusted operating profit of $1.3 million compared with $0.6 million in the prior-year quarter.
Financial Update
Aegion had cash and cash equivalents of $87.6 million at the end of first-quarter 2017 compared with $129.5 million at the end of 2016. The company recorded cash used for operating activities of $26.3 million in the reported quarter compared with cash usage of $2 million recorded in the year-ago quarter.
Aegion’s consolidated backlog came in at $712 million as of Mar 31, 2017, down 6% year over year due to execution of the large deepwater pipe coating and insulation project. Excluding the deepwater project, backlog increased 6% to $661 million. New orders increased in all three segments of the company during first-quarter 2017 compared to first-quarter 2016, by a total of 29% to $333 million.
Outlook
For 2017, Aegion expects higher revenues and operating income across all three platforms to result in solid adjusted earnings per share growth. Further, investments in sales resources, market expansion and R&D will aid its long-term strategy for sustainable organic growth.
Aegion reaffirmed its segments’ guidance with the revenue growth projection for Infrastructure Solutions to exceed the low- to mid-single digit three-year target at slightly lower operating margins in 2017 compared to the 9.8% adjusted operating margin achieved in 2016.
The company guided Corrosion Protection’s revenue growth of mid-teens and mid-single digit operating margins, led by the planned contribution from the deepwater pipe coating and insulation project, and anticipated modest recovery in the energy markets. Further, the company projects Energy Services’ revenues to grow in mid-single digits, on par with the three-year growth target, with operating margins above fourth-quarter 2016 levels.
Share Price Performance
In the last one year, Aegion underperformed the Zacks classified Building & Construction Products Miscellaneous sub-industry with respect to price performance. The stock gained around 9.9%, while the industry recorded gain of 27.9% over the same time frame.
Masco has an average positive earnings surprise of 3.53% for the trailing four quarters. Louisiana-Pacific delivered an impressive average positive earnings surprise of 66.28% over the past four quarters, while KB Home has an average positive earnings surprise of 7.30% for the last four quarters.
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Aegion (AEGN) Lags Q1 Earnings by a Penny, Tops Revenues
Aegion Corporation reported first-quarter 2017 adjusted earnings of 18 cents per share, up around 50% year over year. Earnings, however, missed the Zacks Consensus Estimate of 19 cents. Including one-time items, Aegion reported profit of 17 cents per share in the quarter compared to a loss of 11 cents recorded in the prior-year quarter.
Operational Update
Total revenue of $325 million in the quarter increased 10.6% year over year. Revenues beat the Zacks Consensus Estimate of $319 million.
Adjusted cost of sales increased 8% to $257.6 million from $238 million in the year-ago quarter. Adjusted gross profit improved 21% to $67.6 million from $55.7 million in the prior-year quarter. Adjusted gross margin contracted 280 basis points (bps) year over year to 26.2%.
Aegion Corp Price, Consensus and EPS Surprise
Aegion Corp Price, Consensus and EPS Surprise | Aegion Corp Quote
Adjusted operating expenses climbed 10% year over year to $53 million. Adjusted operating income increased nearly two-fold to $14.6 million. Operating margin in the quarter came in at 5.7%, expanding 250 bps from the year-ago quarter.
Segmental Performance
Revenues from the Infrastructure Solutions segment climbed 2.5% year over year to $128.9 million. The segment’s adjusted operating income plunged 39.5% year over year to $6.1 million due to limited activity in certain regions and planned investments for future growth.
The Corrosion Protection segment’s revenues rose 33.5% to $123.4 million from $92.4 million in the comparable quarter last year, driven by execution of the large deepwater pipe coating and insulation project. The segment reported an adjusted operating profit of $7.2 million compared to a loss of $2.9 million in the year-ago quarter.
Revenues in the Energy Services segment declined 3.7% year over year to $73 million. The segment reported an adjusted operating profit of $1.3 million compared with $0.6 million in the prior-year quarter.
Financial Update
Aegion had cash and cash equivalents of $87.6 million at the end of first-quarter 2017 compared with $129.5 million at the end of 2016. The company recorded cash used for operating activities of $26.3 million in the reported quarter compared with cash usage of $2 million recorded in the year-ago quarter.
Aegion’s consolidated backlog came in at $712 million as of Mar 31, 2017, down 6% year over year due to execution of the large deepwater pipe coating and insulation project. Excluding the deepwater project, backlog increased 6% to $661 million. New orders increased in all three segments of the company during first-quarter 2017 compared to first-quarter 2016, by a total of 29% to $333 million.
Outlook
For 2017, Aegion expects higher revenues and operating income across all three platforms to result in solid adjusted earnings per share growth. Further, investments in sales resources, market expansion and R&D will aid its long-term strategy for sustainable organic growth.
Aegion reaffirmed its segments’ guidance with the revenue growth projection for Infrastructure Solutions to exceed the low- to mid-single digit three-year target at slightly lower operating margins in 2017 compared to the 9.8% adjusted operating margin achieved in 2016.
The company guided Corrosion Protection’s revenue growth of mid-teens and mid-single digit operating margins, led by the planned contribution from the deepwater pipe coating and insulation project, and anticipated modest recovery in the energy markets. Further, the company projects Energy Services’ revenues to grow in mid-single digits, on par with the three-year growth target, with operating margins above fourth-quarter 2016 levels.
Share Price Performance
In the last one year, Aegion underperformed the Zacks classified Building & Construction Products Miscellaneous sub-industry with respect to price performance. The stock gained around 9.9%, while the industry recorded gain of 27.9% over the same time frame.
Zacks Rank & Stocks to Consider
Aegion currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same sector are Masco Corporation (MAS - Free Report) , KB Home (KBH - Free Report) and Louisiana-Pacific Corporation (LPX - Free Report) . All these three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Masco has an average positive earnings surprise of 3.53% for the trailing four quarters. Louisiana-Pacific delivered an impressive average positive earnings surprise of 66.28% over the past four quarters, while KB Home has an average positive earnings surprise of 7.30% for the last four quarters.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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