On Dec 21, we issued an updated research report on premium basic materials company MRC Global Inc. MRC. The company appears well poised to grow on the back of inorganic strategies, which will likely improve its top line in the future. However, it currently faces certain risks stemming from external headwinds.
Bullish Factors
MRC Global intends to strengthen its business on rewarding deals inked with leading energy firms. It also plans to improve near-term revenues with the help of specialized growth schemes. For instance, the company’s recently inked five-year contract for supplying pipe, valve and fitting (''PVF'') products to Phillips 66, as well as other major deals secured by its Norwegian subsidiaries are expected to improve its results in the upcoming quarters. Moreover, the company aims to drive growth with superior customer relationships as well as its non-imitable offerings in the upstream, midstream and downstream markets. Supported by advanced technologies, the company makes concerted attempts to fortify its existing product portfolio.
Few Hints of Trouble
MRC Global operates in a highly competitive industry, and hence is exposed to severe risks of market share loss. Further, the company’s revenues and margins are adversely impacted by expenditure-related changes in the global oil & natural gas industry. At the same time, increasing usage of alternative fuel sources will likely lower oil & gas spending, which, in turn, will hurt the company’s profitability in the future.
Also, reduced consumer spending, weak demand from transmission customers, soft sales in certain end-markets and a strong U.S. dollar have been negatively affecting MRC Global’s revenues and margins in recent times.
Stocks to Consider
MRC Global presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Coeur Mining, Inc. CDE, Chemtura Corporation CHMT and Fortescue Metals Group Limited FSUGY. All three stocks hold a Zacks Rank #2 (Buy).
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