On Oct 1, 2013, we initiated our coverage on
MRC Global Inc.
) with an Underperform recommendation. The company is one of the
leading distributors of pipes, valves and fittings (PVF) and
related products and services to the energy industry.
MRC Global provides products that are used across upstream,
midstream as well as downstream sectors of the oil and gas
industry. Considering the recent decline in the spending levels
in the upstream sector and the transmission segment of the
downstream business accompanied by a planned decline in the oil
country tubular goods (OCTG) product line, we do not see a
significant improvement in results in the coming quarters.
MRC Global reported second-quarter 2013 revenues declining
11.4% year over year to $1.3 billion. The company's overseas
operations expose it to various risks including foreign currency
exchange and geo-political risks. In the second quarter of 2013,
earnings dropped to the extent of 9 cents per share due to the
negative impact of foreign currency exchange transactions.
Additionally, MRC Global's overdependence on a handful of
customers also has its risks. In the second quarter of 2013, six
out of the top 25 customers reduced their spending by $100
million or 39% year over year, which negatively impacted MRC
Following the results, MRC Global significantly reduced its
earnings per share expectations in 2013 to a range of $1.65 to
$1.85 from the previous range of $2.10 to $2.35. Moreover,
revenue expectations have been reduced to a range of $5.1 billion
to $5.3 billion, from the initial range of $5.75 billion to $6.05
The Zacks Consensus Estimate for 2013 dropped 12.6% in the
last 90 days to $1.74 per share and for 2014 the estimate
declined 17.4% to $2.04 per share during the same time frame.
Other Stocks to Consider
MRC Global currently carries a Zacks Rank #4 (Sell). Other
stocks worth a watch in the industry include
Mueller Water Products, Inc.
The Middleby Corporation
). All these stocks carry a Zacks Rank #2 (Buy).
MIDDLEBY CORP (MIDD): Free Stock Analysis
MRC GLOBAL INC (MRC): Free Stock Analysis
MUELLER WATER (MWA): Free Stock Analysis
XYLEM INC (XYL): Free Stock Analysis Report
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