MRC Global Inc. (MRC) reported mixed results for the second quarter of 2014, beating the Zacks Consensus Estimate for revenues but posting in-line earnings. Adjusted earnings per share came in at 42 cents, in line with the Zacks Consensus Estimate. However, the results lagged the year-ago figure of 43 cents by a penny. On a GAAP basis, earnings per share came in at 38 cents.
Revenues
MRC Global reported a year-over-year increase of 18.1% in revenues to $1,497.3 million, beating the Zacks Consensus Estimate of $1,418.0 million. The hike was prompted by a sales rise across all segments.
Geographically, MRC Global reported a 14.4% year-over-year increase in the U.S. revenues to $1,116 million, primarily attributable to a 13.9% organic growth. The line pipe product sales grew 29.7% year over year.
Revenues in Canada declined 2.3% from the year-ago quarter to $150.0 million, due to sale of the PCP distribution and servicing business, which reduced sales by $14.5 million. Also, depreciation in value of Canadian dollars negatively impacted the revenues. However, growth in acquired businesses including Stream, Flangefitt, Hypteck and MSD increased the international sales by 66.7% year over year to $231.7 million.
On a sector basis, upstream sales increased 29.1% to $700.1 million, while midstream sales rose 11.7% to $420.0 million. Downstream sales in the quarter were $377.2 million, up 7.9% year over year.
Margins/Costs
Adjusted gross profit margin was 19.0% compared with 19.7% in the year-ago quarter. Selling, general and administrative expenses, as a percentage of total revenue, came in at 12.4% compared with 12.1% in the second quarter of 2013. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $106.2 million, up from $98.9 million in the prior-year quarter.
Balance Sheet
Exiting the quarter, MRC Global had a cash balance of $36.5 million, up from $30.1 million in the previous quarter. In the reported quarter, long-term debt, net of current portion, increased sequentially to $1,390.0 million from $1,306.3 million.
Cash Flow
In the first six months of 2014, MRC Global used $51.9 million in operating activities versus cash generation of $181.9 million in the prior-year comparable period. Total capital expenditure incurred was $4.6 million, versus $10.6 million in the six months ended Jun 30, 2013.
Outlook
Based on the current results, management has updated its guidance for 2014. For the year, revenues are anticipated in the range of $5.7–$5.9 billion, up from the previous projection of $5.5–$5.8 billion. However, adjusted EBITDA is predicted within $400–$430 million versus $400–$450 million range expected earlier. Further, capital expenditure is expected in the band of $20–$25 million, down from the prior $25.0–$30.0 million range.
Also, MRC Global is expected to generate cash flow from operations within $75.0–$100.0 million, down from the previous range of $175.0–$200.0 million.
Other Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Blount International Inc. (BLT), The Babcock & Wilcox Company (BWC) and Graco Inc. (GGG). While Blount International sports a Zacks Rank #1 (Strong Buy), The Babcock & Wilcox and Graco have a Zacks Rank #2 (Buy).
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