MRC Global Downgraded to Strong Sell - Analyst Blog

On Mar 14, Zacks Investment Research downgraded MRC Global Inc. MRC to a Zacks Rank #5 (Strong Sell) on disappointing results for the fourth quarter of 2013.

Why the Downgrade?

MRC Global reported weak results for the fourth quarter of 2013, with adjusted earnings per share of 32 cents, down 41.8% year over year. The decline in earnings primarily resulted from reduced margins during the quarter. The contribution from acquisitions increased the quarterly revenues by 2.9% year over year to $1.3 billion. However, adjusted earnings per share missed the Zacks Consensus Estimate.

The company experienced an increase in the U.S. sales, where revenues received a boost from the acquisition of Production Specialty and Flow Control Products. However, sales in Canada dropped 11% year over year, due to declining project sales and a weak Canadian dollar.

MRC Global also recorded a 6.7% year-over-year increase in the cost of goods sold. Also, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $87.2 million, down from $99.2 million in the fourth quarter of 2012.

Following the results, the Zacks Consensus Estimate for earnings per share decreased 13.5% to $1.79 for 2014, while the same for 2015 declined 10.9% to $2.13 over the past 30 days.

MRC Global primarily engages in the distribution of pipes, valves, and fittings, and related products and services to the energy industry worldwide.

Other Stocks to Consider

MRC Global currently has a market capitalization of $2.6 billion. Some better-ranked stocks worth a watch in the industry include Valero Energy Partners LP VLP, Access Midstream Partners, L.P. ACMP and Kinder Morgan Management LLC KMR. While Valero Energy sports a Zacks Rank #1 (Strong Buy), Access Midstream Partners and Kinder Morgan Management hold a Zacks Rank #2 (Buy).