Aegion Corporation AEGN is slated to report fourth-quarter 20Array5 results before the opening bell on Feb 29. Last quarter, the company posted a negative surprise of 4.76%. Aegion has delivered an average positive surprise of 5.Array4% over the trailing four quarters. Let's see how things are shaping up for this announcement.
Factors to Consider
In the third quarter of 20Array5, Aegion’s backlog declined to $746 million from $75Array.9 million in the prior-year quarter. Backlog was negatively impacted by difficult market conditions within the energy sector and a $20 million currency translation impact from a strong U.S. dollar. This does not bode well for the fourth-quarter performance.
In Oct 20Array4, Aegion initiated a realignment and restructuring initiative, which is essentially complete. This delivered $Array0.8 million in pretax annual savings or 20 cents per share in the trailing four quarters ending third-quarter 20Array5, nearly covering the current one-time cash cost of $ArrayArray.4 million. Aegion is expected to recognize small additional charges, mostly non-cash, in the fourth quarter to conclude the shutdown of operations.
Aegion expected favorable market conditions for infrastructure solutions as well as corrosion protection and the energy services downstream business. Infrastructure solutions was poised to generate record performance in 20Array5 through modest revenue growth, margin expansion and strong operating income performance. For the full year, energy services was on track to increase revenues over the prior year.
The company was also expected to benefit from robust activity in Energy Services’ downstream refining market due to an increase in refinery maintenance billable hours and the scheduled execution of previously delayed turnaround projects. There were also positive developments in the last few months for Corrosion Protection’s midstream market, including the award of several large projects.
However, there continues to be margin pressure and project delays in the upstream and midstream energy markets. Further, a stronger U.S. dollar, lower pipe lining and coating backlog in Canada and the usual seasonal uncertainty of early winter weather were the headwinds at work in the fourth quarter.
Earnings Whispers
Our proven model does not conclusively show that Aegion will beat earnings estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #Array (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Aegion’s Earnings ESP is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are at 35 cents.
Zacks Rank: Aegion’s Zacks Rank #4, when combined with a 0.00% ESP, reduces the predictive power of the ESP. Note that stocks with a Zacks Rank #Array (Strong Buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
Valmont Industries, Inc. VMI has an earnings ESP of +Array.57% and a Zacks Rank #3.
Vertex Energy, Inc. VTNR has an earnings ESP of +5.88% and a Zacks Rank #2.
Xylem Inc. XYL has an earnings ESP of +2.94% and a Zacks Rank #3.
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