It has been about a month since the last earnings report for Aegion Corp . Shares have lost about 6.7% in that time frame, underperforming the market .
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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.
Aegion Lags Q1 Earnings by a Penny, Tops Revenues
Aegion Corporation reported first-quarter 2017 adjusted earnings of $0.18 per share, up around 50% year over year. Earnings, however, missed the Zacks Consensus Estimate of $0.19. Including one-time items, Aegion reported profit of $0.17 per share in the quarter compared to a loss of $0.11 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.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.
Aegion Corp Price and Consensus
VGM Scores
At this time, Aegion's stock has a subpar Growth Score of 'D' and a Momentum Score of 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 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.
The company's stock is suitable solely for value investors based on our style scores.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
Image: Bigstock
Why Is Aegion (AEGN) Down 6.7% Since the Last Earnings Report?
It has been about a month since the last earnings report for Aegion Corp . Shares have lost about 6.7% in that time frame, underperforming the market .
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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.
Aegion Lags Q1 Earnings by a Penny, Tops Revenues
Aegion Corporation reported first-quarter 2017 adjusted earnings of $0.18 per share, up around 50% year over year. Earnings, however, missed the Zacks Consensus Estimate of $0.19. Including one-time items, Aegion reported profit of $0.17 per share in the quarter compared to a loss of $0.11 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.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.
Aegion Corp Price and Consensus
Aegion Corp Price and Consensus | Aegion Corp Quote
VGM Scores
At this time, Aegion's stock has a subpar Growth Score of 'D' and a Momentum Score of 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 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.
The company's stock is suitable solely for value investors based on our style scores.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.