Updated Research Report on MRC Global - Analyst Blog

On Mar 28, 2014, we issued an updated research report on MRC Global Inc. MRC. The company delivered disappointing earnings per share in the fourth quarter of 2013, which decreased roughly 42% year over year to 32 cents. However, quarterly revenues of $1.3 billion were up 2.9% from the year-ago quarter.

The company attained higher quarterly revenues on the back of inorganic growth. Recently, MRC Global acquired Stream AS and Flangefitt Stainless Ltd. Both the acquisitions are expected to be accretive to earnings in 2014. The company expects the present offshore revenues of 2% to move up to 8% buoyed by the Stream acquisition.

In the quarters ahead, sequential improvement is anticipated in the upstream, downstream and midstream markets. In the reported quarter, the company also witnessed a rise in sales for line pipe products, which are expected to grow in the upcoming quarters as well.

However, in the first quarter of 2014, the company divested its Canadian progressive cavity pump distribution and servicing business to Europump. This divestiture is expected to reduce the Canadian sales by $82 million in 2014, of which $25 million reduction is expected to occur in the first quarter. The divestiture will cease the profit-sharing arrangement with Europump and lead to $7 million pre-tax charge in the first quarter of 2014.

Also, the company's overseas operations expose it to various economic, social as well as foreign currency exchange risks.

These factors resulted in downward revisions in earnings estimates. In the last 60 days, the Zacks Consensus Estimate for 2014 and 2015 declined a respective of 13.5% and 11.3% to $1.79 and $2.13.

Key Picks from the Sector

With a current market capitalization of $2.8 billion, MRC Global has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks worth a look in the industry include Enterprise Products Partners L.P. EPD, Kinder Morgan Management LLC KMR and Magellan Midstream Partners LP MMP. All these stocks carry a Zacks Rank #2 (Buy).