Why Is MRC Global (MRC) Up 4.2% Since the Last Earnings Report?

It has been about a month since the last earnings report for MRC Global Inc. MRC. Shares have added about 4.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

MRC Global Breaks Even in Q1 Earnings, Tops Revenues

MRC Global Inc. reported better-than-expected first-quarter 2017 results.

The company posted break-even results for the quarter, as against the Zacks Consensus Estimate of a loss of $0.06 and the year-ago reported loss of $0.10 per share.  

Revenues: Sales in the reported quarter came in at $862 million, handily beating the Zacks Consensus Estimate of $808 million. Notably, quarterly revenues exceeded the year-ago tally by 10.1%. The upside was stemmed by increased customer activity, majorly in the mid-stream sector.

Segmental Details

MRC Global's first-quarter sales in the U.S. totaled $666 million, up 10% year over year. The year-over-year improvement was driven by increased rig counts and a major ongoing project secured from a transmission customer.

International sales came in at $119 million, up 5% year over year, backed by the Australian line pipe deal received in the mid-stream sector domain.

Revenues from Canada were $77 million, up 20% year over year. The remarkable upside was driven by solid up-stream sector business and appreciation of the Canadian currency with respect to the U.S. dollar.

Margins & Costs: Cost of sales during the quarter was $722 million compared to $650 million recorded in the year-ago quarter. Selling, general and administrative expenses came in at $126 million as against $137 million recorded in the year-earlier quarter.

Gross profit margin in the first quarter was 16.2%, down 80 basis points (bps) year over year.

Balance Sheet & Cash Flow: Existing the first quarter, MRC Global had cash worth $93 million as against $109 million recorded on Dec 31, 2016. Long-term debt at the end of the reported quarter was $404 million compared to $406 million recorded at the end of 2016.

During first-quarter 2017, MRC Global generated $22 million cash from operations, down 62.1% year over year. Capital expenditure during the quarter was $11 million compared to $10 million recorded in the comparable period last year..

The company also successfully completed is ongoing share buyback program (initiated in Nov 2015) worth $125 million, by repurchasing $18 million stock during the quarter, at an average price of $20.54 per share.  As of Mar 31, 2017, MRC Global's outstanding share count was 94.4 million.

Outlook: The company believes that recovering conditions in the oil and gas markets would likely boost revenues and profitability in the quarters ahead.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 155.6% due to these changes.

MRC Global Inc. Price and Consensus

 

MRC Global Inc. Price and Consensus | MRC Global Inc. Quote

VGM Scores

At this time, MRC Global's stock has a nice score of 'B' on both growth and momentum front. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum and growth  investors than value investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising.  The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.