Zacks Investment Research downgraded
MRC Global Inc.
) to a Zacks Rank #5 (Strong sell) on June 4, 2013.
Why the Downgrade?
Recent disclosures made by MRC Global on May 29 resulted in
downward revision in earnings estimates in the last 7 days. The
Zacks Consensus Estimate for 2013 has gone down by 4.0% to $2.17
while for 2014, the estimate decreased 4.8% to $2.58.
Line pipe sales in the two months ended May 31, 2013 were below
the company's original expectations due to reduced investment
activities from its United States customers.
Management of MRC Global now expects line pipe sales to be $100
million below its original forecast and roughly 10% down on a
year-over-year basis for the second quarter 2013 while going down
roughly $300 million year over year for 2013.
Apart from the line pipe sales, OCTG sales of MRC Global are
expected to be down $70 million for the second quarter 2013 and
$200 million for 2013 compared with their respective year-ago
Considering all these factors, management revised its revenue
guidance for 2013 to $5.4-$5.8 billion from $5.75-$5.95 billion
expected earlier. For the second quarter, revenues are likely to
be within the $1.25-$1.35 billion range.
A glimpse into the first quarter 2013 results show that revenue
generation in the quarter was also weak and decreased 5.6% year
over year due to the prevailing weakness in the U.S. upstream and
midstream sectors as well as planned reduction in oil country
tubular goods (OCTG) business.
A weak revenue outlook as well as lower earnings guidance
raises skepticism over the financial results in the quarters
ahead. Currently, for MRC Global, we have an Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) of -6.4% for the second quarter, -4.2% for 2013 and -3.5% for
Other Stocks to Consider
MRC Global is a $2.7 billion company engaged in the distribution
of pipes, valves, and fittings (PVF), and related products and
services to the energy industry worldwide.
Other stocks to watch out for in the industry are
Mueller Water Products, Inc.
), with a Zacks Rank #1 (Strong Buy) while
Valmont Industries, Inc.
W.W. Grainger, Inc.
), each has a Zacks Rank #2 (Buy).
GRAINGER W W (GWW): Free Stock Analysis
MRC GLOBAL INC (MRC): Free Stock Analysis
MUELLER WATER (MWA): Free Stock Analysis
VALMONT INDS (VMI): Free Stock Analysis
To read this article on Zacks.com click here.