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MRC Global (MRC) Displays Bright Prospects Despite Risks

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On May 12, we issued an updated research report on MRC Global Inc. (MRC - Free Report) .

In the past month, this Zacks Rank #3 (Hold) stock has gained 3% compared with the industry’sgrowth of 6.5%.

 

 

Existing Business Scenario

MRC Global is set to benefit from lucrative contract wins and projects. Notably, in the first quarter of 2020, the company clinched new contracts from Noble Midstream and Ameren. Also, it was awarded a renewed contract from Eversource. The company generated roughly 55% of 2019 revenues from its top 25 customers. In addition, it has been benefiting from some of the multiple-year contracts — including those signed with Exxon Mobile and others.

Also, the company’s continuous focus on cash flow generation, managing balance sheet and lowering operating costs will likely be tailwinds. In 2020, it predicts to generate cash flow of $200 million from operating activities, higher than $110 million mentioned earlier. Further, it expects to reduce selling, general and administrative expenses from $550 million in 2019 to $470 million in 2020.

However, the company is suffering from low customer demand environment, weakness in the oil & gas industry, storage capacity constraints, and unfavorable commodity price environment. Notably, weakness across the Permian basin projects (Upstream revenues declined 43% in the first quarter of 2020) will likely continue to affect its top-line performance in the quarters ahead.

In addition, its long-term debt in the last three years (2017-2019) increased 10% (CAGR). At the end of the first quarter of 2020, its long-term debt was $517 million. Also, we find the company more leveraged than the industry, as its long-term debt-to-capital is 41.1%, significantly higher than the industry’s 2.5%.

Key Picks

Some better-ranked stocks are Intellicheck, Inc. (IDN - Free Report) , AZZ Inc. (AZZ - Free Report) and Broadwind Energy Inc. (BWEN - Free Report) . All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intellicheck delivered a positive earnings surprise of 70.24%, on average, in the trailing four quarters.

AZZ delivered a positive earnings surprise of 6.17%, on average, in the trailing four quarters.

Broadwind delivered a positive earnings surprise of 50.00%, on average, in the trailing four quarters.

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