Yahoo Finance MRC Global's (MRC) End-Market Strength Aids, Cost Concerns Ail
MRC Global Inc. MRC is likely to gain from its presence in the diverse end markets, which allows it to counter risks associated with a single market. In the quarters ahead, strength in end markets like upstream production, downstream, gas utilities, midstream pipelines, industrial and energy transition, and others are poised to benefit the stock. Also, strong momentum in MRC’s gas utility and downstream, industrial and energy transition sectors will likely be a tailwind to the stock.
MRC will likely become more competent on lucrative contract wins and projects. Several contracts from largest gas utilities in the United States will likely benefit the gas utility sector. Also, businesses in the downstream, industrial and energy transition sectors are anticipated to gain from contracts with some of the largest refiners in the United States and recent developments in the energy transition project.
MRC Global focuses on rewarding its shareholders through dividend payments and share repurchases. In 2021 and during the first quarter of 2022, MRC paid out dividends worth $24 million and $6 million, respectively. Improved cash positions will help MRC reward its shareholders in times ahead.
However, cost woes and operating expense inflation pose a concern. MRC’s cost of sales increased 19.8% on a year-over-year basis, while selling, general and administrative expenses recorded a year-over-year increase of 7% in the first quarter of 2022. Difficulties regarding supply chain and increases in raw material costs are likely to continue affecting its margins and profitability.
Given its widespread presence in the international markets, MRC remains vulnerable to various environmental laws and regulations in the countries where it operates. Also, MRC is exposed to unfavorable foreign currency movements. MRC Global’s first-quarter 2022 revenues for the International segment declined 13% on a year-over-year basis. A stronger U.S. dollar might depress MRC's overseas business results in the quarters ahead.
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In the past three months, this currently Zacks Rank #3 (Hold) stock has gained 5% compared with the industry’s growth of 18.1%.
Zacks Rank & Stocks to Consider
Some better-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 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have dipped 2.6% in the past three months.
Roper Technologies, Inc. ROP presently has a Zacks Rank #2 (Buy). 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 4.8% in the past three months.
IDEX Corporation IEX is presently Zacks #2 Ranked. IEX’s earnings surprise in the last four quarters was 2.8%, on average.
In the past 60 days, the stock’s earnings estimates have increased 3.2% for 2022. The stock has declined 49% in the past three months.
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