MRC Global (MRC) Q1 Earnings Meet Estimates, Sales View Solid

MRC Global Inc. MRC reported encouraging results for first-quarter 2022. MRC’s adjusted earnings are in line with the Zacks Consensus Estimate of 17 cents while its sales surpassed the same by 3%.

The bottom line reversed the year-ago quarter’s loss of 7 cents per share. Results benefited from higher sales generation and improved margins.

Revenue Details

In the quarter under review, MRC Global’s revenues were $742 million, reflecting an increase of 22% from the year-ago quarter’s level. The top line gained from sales growth in the United States and Canada segments, partially offset by a weakness in the International segment.

Revenues surpassed the Zacks Consensus Estimate of $721 million.

Based on MRC Global’s product line, revenues from carbon pipe, fittings and flanges increased 41.3% year over year to $212 million. The same from valves, automation, measurement and instrumentation was up 4.1% from the year-ago quarter’s figure to $251 million. Gas product revenues grew 37.3% to $184 million. Sales for general products increased 7.3% to $59 million. The same for stainless steel, and alloy pipe and fittings grew 24.1% to $36 million.

Based on the sectors served, revenues from the upstream production were $158 million, up 24% from the year-ago quarter’s level. Midstream pipeline sales totaled $87 million, up 12% from the year-ago quarter’s tally, while sales for gas utilities totaled $271 million, increasing 29% year over year. Downstream, and industrial & energy transition (DIET) sales were $226 million, reflecting year-over-year growth of 16%.

MRC Global has three reportable segments, namely the United States, Canada and International that are discussed in detail below:

Sales generated from the U.S. segment (representing 83.3% of first-quarter revenues) totaled $618 million, rising 28% year over year. The results benefitted from improvements in DIET, upstream production and midstream pipeline sectors.

Revenues from the Canada segment (5.8% of the quarter’s revenues) moved up 34% year over year to $43 million on the back of strength in the upstream production sector.

Sales from the International segment (10.9% of the quarter’s revenues) declined 13% to $81 million due to the pandemic-induced constraints.

MRC Global Inc. Price, Consensus and EPS Surprise

MRC Global Inc. price-consensus-eps-surprise-chart | MRC Global Inc. Quote

Margin Profile

In the quarter under review, MRC Global’s cost of sales increased 19.8% year over year to $606 million. The adjusted gross profit in the quarter increased 28.8% year over year to $152 million. Margin at 20.5% grew 110 basis points (bps) year over year. Adjusted selling, general and administrative expenses were up 9.2% year over year to $107 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 100% year over year to $48 million, while the adjusted EBITDA margin was up 260 bps to 6.5%. Interest expenses were $6 million, flat with the figure reported in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, MRC Global had cash and cash equivalents of $31 million, down 35.4% from $48 million at the end of the previous quarter. Long-term debt, net, increased 1.7% to $300 million from $295 million in the previous quarter.

In the first three months of 2022, MRC Global used net cash of $13 million from operating activities compared with $24 million of net cash generated in the previous year’s quarter. Capital spent on purchasing property, plant and equipment was $2 million, flat year over year.

In the first three months of the current year, MRC repurchased shares worth $2 million and paid out dividends totaling $6 million.

Outlook

For 2022, MRC Global anticipates revenues of $3.1 billion, suggesting growth from $2.67 billion generated in 2021. Revenues in each of the gas utilities, DIET, upstream production and midstream pipeline sectors are predicted to increase in double-digit percentages.

On a segmental basis, the U.S. and Canada sales are predicted to be up in double-digit percentage during 2022. International sales are anticipated to grow in mid-single digits.

Adjusted EBITDA in the ongoing year is anticipated to be $200 million, while the tax rate is expected to be 24-26%. Selling, general and administrative expenses are predicted to be $111-$113 million per quarter. Cash flow from operations is likely to increase modestly year over year while capital expenditure is anticipated to be $10-$15 million.

For second-quarter 2022, MRC anticipates revenue growth in high-single-digit percentage, sequentially.

Zacks Rank & Other Stocks to Consider

With a market capitalization of $930.8 billion, MRC Global currently carries a Zacks Rank #2 (Buy).

Some other top-ranked companies from the industrial products sector are discussed below.

Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank #1. AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AIT’s earnings estimates have increased 5.4% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have rallied 12% in the past three months.

Roper Technologies, Inc. ROP presently has a Zacks Rank of 2. Its earnings surprise in the last four quarters was 2%, on average.

In the past 60 days, ROP’s earnings estimates have increased 1.1% for 2022. The stock has declined 1.1% in the past three months.

Ferguson plc FERG is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, the stock’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). The same has declined 23.4% in the past three months.

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