) slipped 5.71% and closed at $22.14 after the company lowered its
second-quarter and fiscal 2014 guidance at its investor day in New
York. However, this was an automatic reaction as the shares will
soon get a lift as the market reacts to the company's future plans.
These plans, also discussed at the event, include achieving
sustainable earnings growth, increasing cash flow from operating
activities and improving return on invested capital.
The company expects second-quarter earnings between 34 and 36 cents
from the previous guidance of 39 to 41 cents. The guidance was
lowered due to a slower ramp-up of project activity in the second
quarter and weaker margins for parts of the Energy and Mining
segment. While the Water and Wastewater segment is performing in
line with expectations, the Commercial and Structural segment will
likely disappoint. On a positive note, the Commercial and
Structural segment is expected to pick up steam and perform better
in the second half of 2014.
Consequently, the guidance for fiscal 2014 earnings per share has
been lowered to a range of $1.50 to $1.65 from the previous $1.50
to $1.70 range. The guidance remains unchanged for cash flow from
operating activities in the range of $100 million to $110 million
and a 7% to 8% return on invested capital.
Aegion has set long-term earnings per share growth target of 15%.
The company expects to deliver an increase in cash flow from
operating activities at the same rate of earnings per share growth
or higher. The expected earnings per share growth also lays the
foundation for an over 100 basis point annual improvement in return
on invested capital with the goal of reaching 10-12% in 2017.
Conditions in the energy, mining, wastewater pipeline and
commercial infrastructure industries remain favorable for Aegion.
The company also highlighted its initiatives that will position it
for growth. The Energy and Mining platform has expanded its
comprehensive capabilities to target the growing upstream,
midstream and downstream oil and gas segments in North America. The
Brinderson acquisition in 2013 has provided access to the upstream
and downstream markets. In addition, its strikes a better balance
between more predictable and growing recurring sources of revenues
compared to the project-oriented nature of Aegion's key pipeline
Furthermore, there are promising opportunities in the Middle East
to support the execution of a strategy to jointly market its
products. Given these growth prospects, The Energy and Mining
segment is expected to deliver revenue growth between 10% and 12%
annually over the projection of approximately $800 million in 2014
and reach $1.1 billion to $1.2 billion in 2017.
The Commercial and Structural segment aims to strengthen its
already strong position in the North American fiber-reinforced
polymer market through innovation, a shift to a product-centric
sales strategy and investments to significantly enhance its
operating capabilities. The global outlook for its Fibrwrap
technology remains strong, backed by government-led infrastructure
rehabilitation efforts especially to address seismic concerns, in
key Asian markets. The segment is projected to grow from revenues
of $70 million to $85 million in 2014 to $120 million to $130
million in 2017.
In the Water and Wastewater segment, the North American
cured-in-place pipe market is enjoying a cycle of elevated and
sustained municipal expenditures, supported by Insituform's market
leading position. The segment will also benefit from the stable
markets in Europe as well as growth in the Asia-Pacific
region. Aegion estimates segment revenues to grow 3% to 5%
annually, reaching $570 million to $590 million in 2017, with
improving operating efficiencies.
Chesterfield, MO-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 #3 (Hold). Some better-ranked
stocks in the sector include
Simpson Manufacturing Co., Inc.
Gibraltar Industries, Inc.
United Rentals, Inc.
). While Simpson Manufacturing and Gibraltar Industries sport a
Zacks Rank #1 (Strong Buy), United Rentals holds a Zacks Rank #2
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