Share price of MRC Global Inc. MRC surged 14.7% to close at $16.74 on May 1, 2015, after it reported first-quarter 2015 results after the close of market on Apr 30. Earnings per share came in at 28 cents, up 21.7% from the year-ago tally of 23 cents. The bottom line also surpassed the Zacks Consensus Estimate of 18 cents per share on a wider scale.
On a GAAP basis, net income was $29.1 million compared with a net income of $23.5 million in the year-ago quarter.
Revenues
MRC Global’s revenues decreased about 1% year over year to $1,292.3 million. However, the top line exceeded the Zacks Consensus Estimate of $1,207.0 million by 7.1%. The year-over-year decline was caused by lower sales from the Canadian market.
Segment Performance
MRC Global’s U.S. sales for first-quarter 2015 totaled $971.8 million, up 2.5% year over year. The improvement was primarily driven by 21.3% organic growth in the segment.
International sales aggregated $201.1 million in first-quarter 2015, up 5% from the year-ago tally. The uptick came on the back of benefits reaped from the MSD and Hypteck acquisition deals. Moreover, the segment experienced organic growth of 13% at the end of the quarter.
However, the company’s first-quarter top-line results for Canada fell 28.2% year over year to $119.4 million. Strengthening U.S. dollar, with respect to Canadian currency, was mainly responsible for the year-over-year fall. Weakening Canadian dollar increased the costs of MRC Global’s products in the Canadian market and hence, lowered consumer spending for them.
Revenues by Sector
MRC Global’s first-quarter 2015 upstream sales stood at $546.7 million, down 13.9% from the year-ago comparable period and accounting for 42% of gross revenue. The decline was mainly led by lower customer spending.
Midstream sales totaled $379.6 million in the first quarter, representing 30% of total revenue. Segment sales increased 23.55% year over year, supported by improved line pipe sales in the quarter.
The company’s first-quarter downstream sales edged up 0.7% year over year to $366.0 million, accounting for 28% of total revenue. Segment sales improved marginally due to inorganic growth.
Margins & Costs
Adjusted gross profit margin was 18.6% compared with 19.5% in the year-ago quarter. Selling, general and administrative expenses stood at $159.4 million, down approximately 7% from the year-ago value of $171.4 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $86.7 million, up from $84.0 million in the prior-year quarter.
Balance Sheet & Cash Flow
Exiting the first-quarter of 2015, MRC Global had a cash balance of $49.3 million, up a remarkable 96.6% from $25.1 million as of Dec 31, 2014. At the end of the first three months of 2015, the company’s long-term debt, net of current portion, decreased to $1,365.4 million from $1,445.7 million at year-end 2014.
In first-quarter 2015, MRC Global generated $115.6 million of cash from operating activities versus $74.3 million used in the prior-year quarter. Total capital expenditure was $4.4 million in the quarter compared with $2.0 million incurred at the end of first-quarter 2014.
Outlook
MRC Global’s first-quarter 2015 results matched its expectations. After lowering debt burden by $105 million and generating $116 million of cash from operations, the company aims to achieve higher liquidity as well as lower liability in the near future. These goals would be supported by the company’s competent strategies for market share enhancement as well as cost reduction. However, unfavorable appreciation of the U.S. dollar largely impacted the company’s aggregate revenues in the first quarter, making us wary on the stock.
Stocks to Consider
With a market capitalization of $1.71 billion, MRC Global currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include American Capital, Ltd. ACAS, ACCO Brands Corporation ACCO and Actavis plc ACT. All the three stocks hold a Zacks Rank #2 (Buy).
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