On Mar 28, 2016, we issued an updated research report on MRC Global Inc. MRC. The premium basic materials company is facing certain headwinds which are offsetting the positives from its inorganic growth strategies.
Ongoing Issues
Reduced consumer spending, weak demand from transmission customers, soft sales in Australia and Europe and the appreciating U.S. dollar are adversely affecting MRC Global’s top line. Moreover, the company sells various steel products under its tubular product category and is therefore highly sensitive to fluctuations in steel price and supply. The decline in the price of iron ore, a major steel making component, has lowered steel price in the recent times.
Also, intense competition exposes the company to risks of market share losses. The low oil prices are reducing the extent of investments in the energy sector and hence, adversely affecting the company's sales volume. Moreover, greater usage of alternative sources of fuels might hurt the company’s profitability as oil and natural gas industry expenditure levels will decline further in the near future.
Slight Scope for Growth
MRC Global attempts to drive growth through superior customer relationships. The company offers unique products in the upstream, midstream and downstream markets. The company has been focusing on strengthening its product suite through advanced technologies. Buoyed by such developments, MRC Global's products are likely to gain market traction, which will in turn boost revenues, going ahead. In our view, these could offset the negatives to some extent for the Zacks Rank #4 (Sell) stock and aid top-line and bottom-line growth.
Stocks to Consider
Some better-ranked stocks within the industry are Anglo American Platinum Limited AGPPY, AK Steel Holding Corporation AKS and Golden Minerals Company AUMN. All the three stocks presently carry a Zacks Rank #2 (Buy).
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