Aegion (AEGN) Up 27% in 3 Months: What's Driving the Stock?

Shares of Aegion Corporation AEGN have been performing well of late. The global leader in infrastructure protection and maintenance has witnessed its shares surge around 27.2% in the past three months. The company has also outperformed its industry's growth of 11.9%.

Aegion has a market cap of roughly $877 million and average volume of shares traded in the last three months is around 212K. The company has an average positive earnings surprise of 7.05% in the trailing four quarters.

The company carries a Zacks Rank #3 (Hold) and a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners. The VGM Score of A along with some other key metrics makes the company a solid choice for investors.

Let's take a look into the factors that are driving the Aegion stock of late.

Driving Factors

Investors are optimistic on Aegion’s strategic actions focused on generation of more predictable and sustainable long-term earnings growth. Within the infrastructure solutions platform, the company is likely to focus on restructuring three businesses — Tyfo Fibrwrap North America operations, and CIPP (cured-in-place-pipe) operations in both Denmark and Australia. The CIPP businesses in Denmark and Australia along with Fyfe North America are intended to be supplemental growth drivers to the core North America CIPP operations. Consequently, the company is trying aggressively to return these three businesses to profitability in early 2018.

Aegion chose to exit the non-pipe contract application of its Tyfo Fibrwrap technology due to smaller project scopes. The company was also involved in restructuring activities associated with Corrosion Protection’s operations in Canada, which also included downsizing activities reflecting current and anticipated market conditions as well as implementation of other cost savings initiatives across the company. Aegion’s restructuring and cost savings initiatives are anticipated to generate cost savings over $17 million by 2018 and help reduce future earnings volatility.

Aegion’s Infrastructure Solutions segment is poised for growth as the North America CIPP rehabilitation business continues to witness persistent expansion due to good market demand. Further, improved pressure pipe market penetration on the back of new product development will boost revenues. In the Corrosion Protection segment, the cathodic protection business’ margins are gaining from the multiple leadership changes in the first half along with the aggressive focus on improved project execution and labor utilization. Strong backlog position, including high margin international projects, ongoing restructuring activities in Canada, and improved execution in the U.S. cathodic protection business will enable the segment to deliver improved results going forward. The Energy services segment has delivered improved year-over-year performance for the third consecutive quarter which is anticipated to continue in the near term. Backlog is at highest levels since 2015 with strong activity across maintenance, turnarounds, and the construction business. Restructuring efforts undertaken in the past are also yielding results.

So far in 2017, Aegion witnessed a surge of 26.2% in new orders to $1.1 billion from $867 million in the prior-year period, driven by continued momentum across key markets for all the three segments.  At third-quarter end, contract backlog was $756 million, an increase of $141 million from contract backlog at Sep 30, 2016.

Aegion Corp Price and Consensus
 

Aegion Corp Price and Consensus | Aegion Corp Quote

Stocks to Consider

Some better-ranked  stocks in the sector are United Rentals, Inc. URI, Armstrong World Industries Inc. AWI and Patrick Industries, Inc. PATK.

United Rentals has a long-term expected earnings growth rate of 15.6%. Its shares have rallied 46% in the past year. The company  flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Armstrong World Industries carries a Zacks Rank #2 (Buy) and has a long-term expected earnings growth rate of 11.69%. Its shares have gained 36% in the past year.

Patrick Industries, another Zacks Rank #2 stock, has a long-term expected earnings growth rate of 10.56%. Its shares have gained 33% in the past year.

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