On Jan 10, we issued an updated research report on Macquarie Infrastructure Company (MIC - Free Report) .We believe that rising costs and ongoing challenges within the International-Matex Tank Terminals (IMTT) segment will likely continue troubling the company in the quarters ahead.
It’s not surprising that the stock has also put up a dismal show in the recent times. Notably, in the past month, Macquarie’s shares have lost 1.8% against the industry’s growth of 1%.
Read on to find the major factors affecting this Zacks Rank #5 (Strong Sell) company’s prospects and why it may be prudent to avoid the stock at the moment.
Factors at Play
Escalating costs and expenses has been a major cause of concern for Macquarie over the past few quarters. Notably, in third-quarter 2018, the company’s cost of services and cost of product sales increased 8.8% and 33.9% year over year, respectively. Overall, operating expenses rose 7.2%. The company perceives that flaring interest expenses and higher acquisition-related costs might continue denting its bottom-line performance in the upcoming quarters.
Also, in the third quarter, revenues of Macquarie’s IMTT segment fell 11.9% year over year. The company believes that IMTT segment’s performance was hurt due to the expected fall in capacity utilization and marginally lower-than-average rates of storage. Macquarie intends to offset the ongoing challenges within IMTT segment with the repurposing and repositioning moves, but these initiatives will bring in benefits only over the long term.
Moreover, on an Enterprise Value/EBITDA (TTM) basis, Macquarie’s shares look overvalued compared to its industry with respective tallies of 18.0x and 11.2x for the past year. This makes us cautious toward the stock.
Stocks to Consider
Some better-ranked stocks in the Zacks Conglomerates sector are Hitachi Ltd. (HTHIY - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) and HC2 Holdings, Inc. (HCHC - Free Report) . While Hitachi sports a Zacks Rank #1 (Strong Buy), Carlisle and HC2 Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hitachi delivered average earnings surprise of 55.51% in the trailing four quarters.
Carlisle pulled off average positive earnings surprise of 11.90% in the trailing four quarters.
HC2 Holdings outpaced estimates in the last reported quarter by 111.90%.
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