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Aegion Drops to 52-Wk Low on Lower Guidance - Analyst Blog

Posted: 12/20/2013 9:18:00 AM
Referenced Stocks: AEGN;CSTE;JHX;SSD

Shares of Aegion Corporation ( AEGN ) dipped to its 52-week low of $19.67 and then closed at $20.37 on Dec 18, falling 7% in a day as the company lowered its fiscal 2013 earnings outlook. The guidance cut was due to a lower workable backlog, inaccurate cost estimates for several key projects and the postponement of new projects.

Aegion has slashed its fiscal 2013 adjusted earnings guidance to a range of $1.27 and $1.32 per share from its earlier guidance of $1.53 to $1.60 a share. This is much below the current Zacks Consensus Estimate of $1.45, which projects year-over-year increase of 3.57%. Compared to the earnings of $1.40 in fiscal 2012, the guidance reflects a decline of 9% to 6%.

For the fourth quarter, Aegion expects its adjusted earnings per share to be in the range of 40 cents to 45 cents. The Zacks Consensus Estimate is currently pegged at 58 cents, depicting a 48.21% year over year growth. Compared to the year-ago quarter's earnings of 38 cents, the guidance reflects an increase of 5% to 18%.

The revised fourth quarter outlook reflects a shift in project activity into 2014 for several businesses. Aegion stated that the Canadian construction season is proceeding at an abnormally slow pace, affecting United Pipeline Systems' and Bayou's Canadian operations. The pace for offshore pipe welding by the general contractor for the Saudi Arabia Wasit gas field project is below predicted levels and is not expected to improve in December. Several important projects for the Asia-Pacific water and wastewater business also did not commence as scheduled in the fourth quarter.

Majority of the cutdown in the yearly guidance is due to the expected weak results in the Commercial and Structural segment. Aegion stated that the North American business of its Commercial and Structural segment continued to struggle during the last two months due to lower workable backlog from a stall in sales activity and project performance issues from inadequate cost estimation on several key projects in late 2012. Furthermore, customers are taking more time to finalize awarding new contracts and issue work releases. Delays in the setup of new projects in hand have made matters worse for the segment.

Aegion is taking steps to enhance the sales organization to properly resource and align the organization in its primary end markets - pipelines, buildings and transportation. Aegion is instituting best-in-class project management to ensure consistency in execution on all projects. These efforts are expected to lead to improved sales acquisitions and project execution in 2014.

Nevertheless, Aegion is witnessing strong performance from North America Water and Wastewater and anticipates backlog for this business to be at record levels at the end of this year. Corrpro and United Pipeline Systems have supportive end markets in North America and the Middle East. The Brinderson acquisition is also expected to boost Aegion's  earnings per share
Based on the success from the investments in sales, project management and operational execution in the Commercial and Structural platform, 2014 should be a year of recovery for Aegion. During the year, the company will execute projects deferred from 2013, as well as build backlog and improve execution throughout the year.

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 #5 (Strong Sell). Some better-ranked stocks in the sector include CaesarStone Sdot-Yam Ltd. ( CSTE ), James Hardie Industries plc ( JHX ) and Simpson Manufacturing Co., Inc. ( SSD ). While CaesarStone and James Hardie carry a Zacks Rank #1 (Strong Buy), Simpson Manufacturing holds a Zacks Rank #2 (Buy).

AEGION CORP (AEGN): Free Stock Analysis Report

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SIMPSON MFG INC (SSD): Free Stock Analysis Report

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