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Why Is MRC Global (MRC) Up 9.5% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for MRC Global Inc. (MRC - Free Report) . Shares have added about 9.5% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MRC 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.

First-Quarter 2018 Highlights

MRC Global reported better-than-expected results for first-quarter 2018.

Earnings/Revenues

Quarterly adjusted earnings came in at 13 cents per share, beating the Zacks Consensus Estimate of 9 cents. The company posted break-even results in the year-ago quarter.

Aggregate sales in the first quarter came in at $1,010 million, surpassing the Zacks Consensus Estimate of $954 million. Top-line results also improved 17.2% year over year.

Segmental Break-Up

First-quarter sales in the United States totaled $806 million, up 21% year over year. Solid growth from all end-markets supported the upswing.

International sales came in at $126 million, up 6% year over year. The upswing was driven by robust upstream project activity and favorable foreign currency translation.   

Revenues from Canada marginally improved 1% year over year to $78 million. Growth in midstream and downstream businesses were largely hurt by weaker upstream business performance during the reported quarter.

Costs/Margins

Cost of sales during the reported quarter was $841 million compared to $722 million recorded in the year-earlier quarter. Adjusted gross profit margin in the reported quarter came in at 19.1%, up 90 basis points (bps) year over year.

Selling, general and administrative expenses came in at $138 million, higher than $126 million recorded in the year-earlier quarter. Operating margin was 3.1% in the quarter, up 150 bps year over year.

Balance Sheet/Cash Flow

Existing the first quarter, MRC Global had cash worth $45 million, down from $48 million recorded on Dec 31, 2017. Long-term debt at the end of the first quarter was $635 million compared to $522 million recorded at the end of 2017.

In the first three months of 2018, the company used $74 million cash from operations, as against $22 million generated in the comparable period last year. Capital expenditure during the first quarter was $5 million, down from $11 million posted in the prior-year quarter.

During the first quarter, MRC Global repurchased $30 million common stock at an average price of $17.39 per share, under its ongoing $100-million share-repurchase program. Subsequent to the quarter, the company acquired another $20-million common stock at the same average price. The program is scheduled to close on Dec 31, 2018.

Outlook

MRC Global expects that improving macroeconomic conditions across all end-markets will likely boost its revenues and profitability in the near term. The company also remains on track to improve shareholders’ remuneration.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter. Last month, the consensus estimate has shifted by 16.3% due to these changes.

MRC Global Inc. Price and Consensus

 

VGM Scores

At this time, MRC has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise MRC has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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