A month has gone by since the last earnings report for Aegion Corporation (AEGN - Free Report) . Shares have added about 15.1% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is AEGN 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.
Aegion Beats on Q1 Earnings & Sales, Affirms View
Aegion reported first-quarter 2018 adjusted earnings of 13 cents per share, which declined 28% year over year. Earnings, however, beat the Zacks Consensus Estimate by a penny.
Including one-time items, Aegion reported loss of 6 cents per share in the quarter, against earnings of 17 cents per share posted in the prior-year quarter.
Total revenues in the quarter remained flat year over year, at $325 million, as record revenues of the Energy Services segment were offset by lost contribution from the large deepwater pipe coating and insulation project. The revenue figure beat the Zacks Consensus Estimate of $299 million.
Adjusted cost of sales increased 2% to $263 million from $258 million in the year-ago quarter. Adjusted gross profit decreased 9% to $61.5 million from $67.6 million in the prior-year quarter. Adjusted gross margin shrunk 180 bps year over year to 19%.
Adjusted operating expenses edged down 0.6% year over year to $52.7 million. Adjusted operating income plummeted 39% year over year to $8.8 million. Operating margin in the quarter came in at 2.7%, contracting 180 bps from the year-ago quarter.
Revenues from the Infrastructure Solutions segment improved 4%, year over year to $134 million. The segment’s adjusted operating income plunged 47% year over year to $3.2 million.
The Corrosion Protection segment’s revenues declined 20% to $98 million from $123 million recorded in the prior-year quarter. The segment posted an adjusted operating profit of $2.9 million, down from the $7.2 million reported in the year-ago quarter.
Revenues in the Energy Services segment increased 27% year over year to $92 million. The segment’s adjusted operating profit increased two-fold to $2.7 million, year over year.
Aegion reported cash and cash equivalents of $87.2 million at the end of the first quarter, down from $105.7 million witnessed at the end of 2017. The company posted cash flow from operations of $1.3 million during the quarter compared with cash usage of $27.7 million recorded in the comparable quarter last year.
Aegion’s consolidated backlog came in at $718 million as of Mar 31, 2018, up 9% year over year. New orders inched up 1% to $353 million during the reported quarter.
Update on Strategic Actions
In 2017, Aegion had embarked on a series of strategic actions targeted to generate more predictable and sustainable long-term earnings growth. Among others, the company initiated a process to divest the Corrosion Protection’s pipe coating and insulation business in Louisiana. It expects the sale to be completed by first half of 2018.
In addition, the company has made progress in restructuring activities associated with the decision to exit the Infrastructure Solutions’ North American activity for non-pressure pipe contracting applications of the Tyfo Fibrwrap system. Aegion will also focus on realigning its Infrastructure Solutions’ operations in Australia and Denmark under the restructuring efforts.
The company was also involved in restructuring activities associated with Corrosion Protection’s operations in Canada, which also included downsizing activities, reflecting current and anticipated market conditions.
Aegion incurred total restructuring charges of $5 million during the first quarter. For 2018, total restructuring and impairment charges are estimated to be between $117 and $120 million, with total cash charges of $19-$21 million, most of which are expected to be completed before the end of first half of 2018. The company’s restructuring and cost-saving initiatives are anticipated to generate more than $20 million in 2018.
Aegion reaffirmed its adjusted earnings per share growth outlook of more than 30% in 2018. This is backed by its focus on strategic actions, along with ongoing market and order strength. The company will also benefit from the positive momentum in its U.S. and Canada cathodic-protection businesses.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
At this time, AEGN has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was also 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks''style scores indicate that the company's stock is suitable for value and growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, AEGN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.