On Nov 5, we issued an updated research report on MRC Global Inc. (MRC - Free Report) .
Let’s delve deeper to find out the key factors, which are likely to influence its operational performance moving ahead.
MRC Global is poised to become more competent on the back of lucrative contract wins and projects. For instance, the company is trying to address the Permian basin productivity shortfall by actively working on 10 major transmission projects. These projects are anticipated to boost the company's revenues by $150-$200 million through 2018-2020. Additionally, the major contracts secured from Statoil (July 2017) are anticipated to augment its yearly sales by roughly $7 million over the next four years. In addition, the five-year long maintenance, repair and operations agreement signed with Exxon Mobile (March 2017) is predicted to increase MRC Global’s yearly sales by nearly $50 million for consecutive five years, starting 2018.
Also, the company’s U.S. segment is witnessing improved operational performance, owing to increased drilling and well completion activity in the upstream sector, as well as appropriate delivery of large petrochemical projects in the downstream sector. Moreover, the Canada segment is experiencing improved performance due to growth in upstream and downstream businesses. MRC Global expects that these positives to continue driving its top-line performance in the quarters ahead.
Moreover, the company intends to augment its shareholders’ remuneration over time. In sync with this, it has lately rolled out a new share repurchase program valuing $150 million. Since 2015, MRC Global has issued three buyback programs and repurchased common stock of nearly $225 million. The company’s new repurchase program is predicted to expire on Dec 31, 2019. Over time, MRC Global has tried to improve its cash position in order to introduce such programs.
However, the company expects that inflationary pressure (especially inflation in line pipe prices) will continue to escalate its LIFO related expenses. Notably, it currently anticipates witnessing LIFO expenses of $64 million in 2018, higher than the prior view of $50 million. Also, ongoing midstream business issues might continue to trouble the company.
Further, strong competition from various big and small market players including Tenaris S.A. (TS - Free Report) , Valmont Industries, Inc. (VMI - Free Report) and Synalloy Corporation remain a threat to MRC Global’s profitability.
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