) reported its fourth-quarter 2013 adjusted earnings from
continuing operations at 40 cents per share, marking a
year-over-year fall of 2%. The results were in line with the
Zacks Consensus Estimate. While the North American Water and
Wastewater business excelled in the quarter, performances of the
Energy and Mining as well as Commercial and Structural businesses
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Including acquisition-related expenses of 3 cents per share,
earnings came in at 37 cents per share in the reported quarter,
down from 40 cents in the prior-year quarter. Earnings in the
year-ago quarter included acquisition-related expense of a penny.
Total revenue was $315.7 million in the said quarter, up 16% year
over year. Brinderson contributed $60 million in revenues during
the quarter. However, revenues fell short of the Zacks Consensus
Estimate of $320 million.
The year-over-year revenue growth was driven by increased
revenues in the North American Water and Wastewater segment,
partly offset by decreased revenues from the industrial linings
business, slowdown in the Canadian pipeline construction activity
and a lull in pipe coating project activity for the oil and gas
market in the Gulf of Mexico.
Cost of sales increased 19% to $245.8 million from $271.6 million
in the year-ago quarter. Gross profit rose 7.4% year over year to
$70.9 million. Gross margin contracted 180 basis points (bps)
year over year to 22.5%.
Adjusted operating expenses went up 11% year over year to $48
million. Adjusted operating income was $23.9 million, down 6.9%
year over year, leading to 180 bps contraction in the operating
margin to 7.6%.
Revenues from the
Energy and Mining
segment grew 29.2% year over year to $176 million. The segment's
operating income went down 18.6% year over year to $13.9 million
due to lack of project activity and decline in international
market conditions for the industrial linings business.
North American Water and Wastewater
segment's revenues increased 14% to $97.9 million from $85.7
million in the prior-year quarter. The segment's operating income
rose an impressive 75.9% year over year to $10 million. The
growth was driven by increased volumes across all geographies.
Sales from the
International Water and Wastewater
segment were $29.5 million, down 2.6% from the year-ago quarter.
The segment reported an operating income of $1.5 million, turning
around the loss of $1.8 million in the year-ago quarter. The
closure of the legacy projects in Singapore resulted in a $2
million reduction in the loss associated with these projects.
Revenues in the
Commercial and Structural
segment declined 37% year over year to $12 million. The segment
reported an operating loss of $3.3 million versus an operating
income of $4 million in the year-ago quarter.
Consolidated backlog in the fourth quarter went up 6% year over
year to $759 million (including Brinderson backlog of $268.3
million). Contract backlog in the North American Water and
Wastewater segment was a record $241.9 million in the quarter, up
30.8% from the year-ago quarter. Energy and Mining backlog grew
78% year over year to $429 million. However, backlog in the
Global Commercial and Structural segment declined 1.9% year over
year to $49.8 million. The International Water and Wastewater
business also registered a decrease of 32.5% to $38 million in
Aegion ended 2013 with cash and cash equivalents of $158 million,
up from $133.7 million as of 2012-end. Cash flow from operations
was $84 million as of Dec 31, 2013, against $110.7 million as of
Dec 31, 2012.
As of Dec 31, 2013, long-term debt increased to $366.6 million
from $221.8 million as of Dec 31, 2012. Debt-to-capitalization
ratio was 33.5% as of Dec 31, 2013 compared with 26% as of Dec
Fiscal 2013 Performance
For full-year 2013, Aegion reported earnings per share of $1.27,
down 11.8% from $1.44 in 2012. The results fell short of the
Zacks Consensus Estimate of $1.39 and also from the management
guidance range of $1.45 to $1.50.
Revenues for the year 2013 increased 4.3% year over year to $1091
million. However, revenues lagged the Zacks Consensus Estimate of
For full-year 2014, Aegion forecasts earnings per share in the
range of $1.50 to $1.70. Cash flow from operations is expected to
be between $100 and $110 million. The company anticipates return
on invested capital in the range of 7%-8%.
In the first quarter of 2014, Aegion will combine the North
America Water and Wastewater as well as International Water and
Wastewater segments into a Global Water and Wastewater segment.
In 2014, Global Water and Wastewater revenues are expected in the
range of $500-$525 million and its operating margin is projected
to be 7%-8%.
In addition, the Energy and Mining platform is expected to
benefit from Brinderson's contribution. Continued growth in the
corrosion engineering as well as cathodic projection and linings
business will also help development. Energy and Mining revenues
are expected in the range of $770 million and $800 million, with
operating margin of 8%-9%.
Commercial and Structural segment will be benefited from vertical
integration, expertise of engineering veterans and intellectual
property protections across the value chain. Additionally, Aegion
has made significant investments to enhance sales. Revenues are
expected in the band of $70-$85 million with operating margin
ranging from negative low single digits to positive low single
Moreover, strategic investments and backlog will expectedly
bolster growth for Aeigon. A favorable market outlook supporting
water and wastewater will also drive growth. However, Aegion
remain cautious about pipe coating market.
Chesterfield, Missouri-based Aegion is a diversified building and
construction company which provides infrastructure protection,
proprietary technologies and facilities. It also offers services
related to the rehabilitation and improvement of sewer, water,
energy and mining piping systems.
Aegion currently carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the sector include
CaesarStone Sdot-Yam Ltd.
). While CaesarStone sports a Zacks Rank #1 (Strong Buy), USG and
Wolseley have a Zacks Rank #2 (Buy).