Aegion Corporation’s (AEGN - Free Report) subsidiary, Insituform Technologies, LLC (“Insituform”) recently received two wastewater pipelines rehabilitation contracts worth more than $14 million from a municipal agency in New York.
Per the contract, the company will rehabilitate more than 50 miles of eight to 48 inch diameter wastewater pipelines using Insituform cured-in-place pipe (“CIPP”). The project is likely to be completed by the end of June 2020.
Since 1971, Aegion has maintained its market leadership position in the remediation of wastewater pipelines in North America using CIPP technology. In fact, it has restored more than 90 miles of eight to 24 inch diameter wastewater pipelines for the municipality using CIPP.
Solid Rehabilitation Projects to Aid Top Line
Over the past several years, Aegion’s Infrastructure Solutions business — under which it performs municipal water and wastewater pipeline works — has completed several large projects within the city. The business — which accounted for 50.5% of third-quarter 2019 revenues — is the largest contributor to top-line growth and remains committed to maintain its market leadership position in the rehabilitation of pipelines.
In third-quarter 2019, the segment’s revenues (excluding exited or to-be-exited businesses) grew 2% year over year. Adjusted gross and operating margins also rose 70 basis points (bps) and 60 bps, respectively, from the prior-year period. The upside mainly stemmed from strong improvements in crew productivity in the North America CIPP business and the exit of underperforming international CIPP operations.
Notably, new orders in the segment jumped more than 40% from the year-ago period, backed by strongest quarterly wins in the North America CIPP business.
This market leader in the rehabilitation of wastewater pipelines in North America expects a modest improvement in adjusted EPS for the current year on the back of its strong backlog position and market outlook for core businesses. Particularly in the Infrastructure Solutions business, it predicts revenue growth to be 1-2% after adjusting for the effect of exited or to-be-exited operations, supported by estimated improvements in crew productivity and project mix within North America CIPP.
Aegion’s shares have gained 41% in the past six months compared with its industry’s growth of 19.5%. Estimates for the fourth quarter have moved north over the past 30 days, reflecting analysts’ optimism surrounding the company’s prospects. Contract wins like the latest one are expected to support it in the upcoming quarters as well.
Zacks Rank & Other Key Picks
Aegion currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same space include TopBuild Corp. (BLD - Free Report) , Gibraltar Industries, Inc. (ROCK - Free Report) and Installed Building Products, Inc. (IBP - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
TopBuild, Gibraltar and Installed Building have projected earnings growth rate of 29.1%, 19.2%, and 20.6%, respectively, for the current year.
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