It has been about a month since the last earnings report for MRC Global (MRC - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MRC due for a breakout? 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 catalysts.
MRC Global Q3 Earnings & Revenues Lag Estimates
MRC Global reported weaker-than-expected results for third-quarter 2018.
Quarterly adjusted earnings came in at 20 cents per share, missing the Zacks Consensus Estimate of 23 cents. The company had reported a loss of 3 cents per share in the year-ago quarter.
Aggregate sales in the third quarter were $1,071 million, up from $959 million reported in the year-ago tally. However, the top-line figure missed the Zacks Consensus Estimate of $1,118 million.
Third-quarter revenues in the United States totaled $859 million, up 13% year over year. Delivery of large petrochemical projects in the downstream sector and increased drilling and well completion activity in the upstream sector boosted the segment’s quarterly top-line performance.
International sales in the reported quarter came in at $134 million, up 9% year over year. The upside primarily stemmed from stronger upstream project activity in Kazakhstan. However, unfavorable foreign exchange movement and non-recurring midstream pipeline projects dampened the segment’s quarterly revenues.
Revenues from Canada marginally improved 1% year over year to $78 million. Growth in upstream and downstream businesses was partially offset by weaker midstream business performance during the Jul-Sep period. Moreover, unfavorable foreign-exchange movement had affected the segment’s revenues in the reported quarter.
Cost of sales during the third quarter was $899 million compared to $807 million recorded in the year-earlier quarter. Adjusted gross profit margin in the quarter came in at 20.1%, up 110 basis points (bps) year over year. The company noted that this upswing was driven by the benefits of its inventory management and gross margin strategies. Notably, the quarterly gross margin numbers recorded were the highest since first-quarter 2013.
Selling, general and administrative expenses came in at $140 million, higher than $130 million recorded in the year-earlier quarter. Operating margin was 3% in the quarter under review, up 70 bps year over year.
Balance Sheet/Cash Flow
Existing the Sep-end quarter, MRC Global had cash worth $29 million, down from $48 million recorded on Dec 31, 2017. Long-term debt at the end of the third quarter was $715 million compared to $522 million posted at the end of 2017.
In the first nine months of 2018, the company used $146 million cash from operations, as against $37 million generated in the comparable period last year. Capital expenditure during the third quarter was $15 million, down from $23 million recorded in the prior-year quarter.
In October, MRC Global’s board of directors rolled out a share-repurchase program, under which it can buyback common stock worth $150 million. The program will likely expire on Dec 31, 2019.
MRC Global expects that seasonal aspects will depress its fourth-quarter 2018 performance. Nonetheless, the company plans to combat this headwind backed by project deliveries that has been pushed from the third quarter to the fourth quarter. However, the company believes recovery in the oil & gas market conditions, increased liquidity and greater operational excellence will strengthen its near-term performances.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -30.58% due to these changes.
At this time, MRC has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MRC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.