Shares of Aegion Corporation AEGN dipped 1.20% on reporting a 25% drop in fourth-quarter earnings to 36 cents per share. Earnings, however, beat the Zacks Consensus Estimate by a penny.
Including restructuring, impairment and acquisition related items, Aegion reported a loss per share of 91 cents in the quarter, a penny wider than a loss of 90 cents in the prior-year quarter.
Operational Update
Total revenues of $331 million in the quarter declined 6% year over year, falling short of the Zacks Consensus Estimate of $338 million.
Adjusted cost of sales decreased 2% to $263 million from $268 million in the year-ago quarter. Adjusted gross profit declined 18% to $67 million from $84 million in the prior-year quarter. Adjusted gross margin contracted 340 basis points (bps) year over year to 20.4%.
Adjusted operating expenses went down 17% year over year to $46 million. Adjusted operating income was $21.8 million, down 24% year over year. Operating margin in the quarter was 6.6%, contracting 160 bps from the year-ago quarter.
Segmental Performance
Revenues from the Infrastructure Solutions segment declined 7% year over year to $135 million. The segment’s adjusted operating income decreased 3% year over year to $15.3 million.
The Corrosion Protection segment’s revenues dropped 15% to $109 million from $127 million in the prior-year quarter. The segment’s adjusted operating income plunged 73% to $2.7 million.
Revenues in the Energy Services segment increased 9% year over year to $86.9 million. The segment reported an operating income of $3.8 million, a 33% increase from the year-ago quarter.
Backlog
Consolidated backlog at the end of the year was $777 million, a 2.4% increase year over year.
Financial Update
Aegion had cash and cash equivalents of $209 million at the end of the year compared with $175 million at 2014 end. The company generated cash flow from operations of $132 million in 2015, up from $82 million in 2014. Long-term debt, excluding the current portion, was $338 million as of Dec 31, 2015, compared with $351 million as of Dec 31, 2014.
2015 Performance
Aegion reported earnings per share of $1.28 in 2015, down 7% from $1.37 per share in the prior year. Earnings beat the Zacks Consensus Estimate of $1.27. Including one-time items, the company reported a loss per share of 22 cents, narrower than the year-ago loss of 88 cents per share.
The losses incurred in both the years were due to expenses and charges associated with Aegion's strategic realignment and restructuring plan announced in Oct 2014 and the restructuring plan announced in Jan 2016. Revenues edged up 0.2% to $1,334 million, falling short of the Zacks Consensus Estimate of $1,341 million.
Realignment and Restructuring Plan
In Oct 2014, Aegion announced a realignment and restructuring initiative. The execution of restructuring activity significantly improved through the realignment of reporting segments as well as the decision to exit nonperforming international cured in place pipe (CIPP) contracting markets. The restructuring initiative achieved its objective of generating pre-tax savings of $10.8 million, or 20 cents per share, which was fully realized in 2015.
Given the slump in oil prices, Aegion announced, in Jan 2016, a restructuring plan to reposition Energy Services' upstream operations in California, right-size the Corrosion Protection platform to compete more effectively in the energy markets as well as reduce corporate and other operating expenses.
Management plans to complete cost reductions and record most of the estimated pre-tax charges of $7 million to $9 million during the first quarter of 2016. The restructuring initiative is expected to reduce consolidated annual operating expenses by approximately $15 million, a major portion of which will be realized in 2016.
Outlook
The company expects stable market conditions across many of its end markets. In the wake of a challenging energy market, Aegion has reduced its exposure in certain North American high cost extraction oil regions and cut its annual operating costs by approximately $15 million. Despite the difficult energy environment, Aegion projects 2016 adjusted earnings per share to be in line with 2015 results. This includes an anticipated contribution in the fourth quarter from a significant multi-year pipe coating and insulation contract.
Aegion is pursuing strategic initiatives to expand its presence in the rehabilitation of pressure pipelines, while investing in new tools and process to expand its capabilities in midstream pipelines. The company is also adding higher margin services to broaden its portfolio of solutions for customers. In 2016, Aegion will launch a company-wide continuous improvement initiative to enhance productivity and invest in sales efforts to accelerate organic growth.
Aegion currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the sector include Gibraltar Industries, Inc. ROCK, Headwaters Inc. HW and Simpson Manufacturing Co., Inc. SSD. All three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment