We issued an updated research report on MRC Global Inc. (NYSE: MRC) on Jun 18, 2014. The company has been receiving long-term contracts, which lead to increased revenues. In the next five years, these contracts are expected to yield $700 million in revenues from the lower 48 states and Canada.
The company has strong inorganic growth potential as well. Its recent acquisitions, Hypteck in Jun 2014 and MSD Engineering in May 2014, are expected to contribute significantly in the quarters to come.Further, MRC Global acquired Stream AS in Jan 2014 and Flangefitt Stainless Ltd in Dec 2013.
The company's efforts to reduce costs are expected to bear fruit in the coming quarters. In April this year, MRC Global launched a voluntary retirement plan in accordance with its plan to streamline costs. The company is however, dependent on a handful of customers. This gives rise to the possibility of lower revenues, in case of change in the customers' spending pattern.
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Moreover, revenues generated from MRC Global's Canadian business are expected to drop, owing to the divestiture of the Canadian progressive cavity pump distribution and servicing business. Canadian sales are assumed to reduce by $82 million in 2014, of which $23 million reduction occurred in the first quarter.
The company recorded lower-than-expected earnings and revenues for the first quarter of 2014. While earnings fell 37.8% year over year to 28 cents per share,revenues were flat at $1.4 billion compared with the year-ago quarter.
With a market capitalization of $2.9 billion, MRC Global carries a Zacks Rank #2 (Buy). Other stocks worth a watch in the industry include Boardwalk Pipeline Partners, LP (NYSE: BWP), Delek Logistics Partners, LP (NYSE: DKL) and Magellan Midstream Partners LP (NYSE: MMP). All these stocks sport a Zacks Rank #1 (Strong Buy).
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