Tuesday, April 28, 2015

Strong Sell on MRC Global - Analyst Blog

Zacks Investment Research downgraded MRC Global Inc. (MRC) to a Zacks Rank #5 (Strong sell) on Jul 2, 2013.

Why the Downgrade?

Weak top-line results in the last quarter as well as below expected sales outcome in the two months ended May 2013 resulted in lower earnings estimates for MRC Global.

As per recent disclosures, management of MRC Global revised its revenue guidance down from $5.75-$5.95 billion to $5.4-$5.8 billion for 2013 while it anticipates the second quarter 2013 revenue to range within $1.25-$1.35 billion.

Line pipe sales are expected to be $100 million below the original forecast and roughly 10% down on a year-over-year basis for the second quarter 2013. The same is expected to be down roughly $300 million year over year for 2013. MRC Global's OCTG sales are expected to be down $70 million for the second quarter 2013 and $200 million for 2013 compared with their respective year-ago periods.

A weak revenue outlook as well as lower earnings guidance raises skepticism over the financial results in the quarters ahead. Currently, for MRC Global, we have an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of -5.0% for the second quarter 2013, -5.0% for 2013 and -0.4% for 2014.

Also in the last 60 days, the Zacks Consensus Estimate for 2013 has gone down by 11.9% to $1.99 while for 2014, the estimate decreased 8.9% to $2.47.

Other Stocks to Consider

MRC Global primarily engages in the distribution of pipes, valves, and fittings (PVF), and related products and services to the energy industry worldwide. The company currently has a $2.9 billion market capitalization.

Other stocks to watch out for in the industry are Mueller Water Products, Inc. (MWA), Valmont Industries, Inc. (VMI) and W.W. Grainger, Inc. (GWW).

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