Aegion (AEGN) to Report Q2 Earnings: What’s in the Cards?

Aegion Corporation AEGN is slated to announce second-quarter 2018 results on Aug 1, after market close.

In the last reported quarter, Aegion delivered a positive earnings surprise of 8.33%. However, the company’s earnings missed the Zacks Consensus Estimate in two of the last four quarters. It recorded an average negative earnings surprise of 0.17% in the past four quarters.

Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider

The Zacks Consensus Estimate for Aegion’s earnings per share is pegged at 39 cents for the second quarter, underlining roughly 14.7% year-over-year growth. The Zacks Consensus Estimate for total sales of $328.8 million, however, roughly indicates a 7.2% drop from the prior-year quarter.

Strong backlog, along with continued strength in key markets, as well as the company’s focus on restructuring actions remain major catalysts for the company’s growth. North America Wastewater Rehabilitation orders remained strong. The broader energy market's higher oil prices are additional tailwind for the linings and coating businesses, and corrosion protection.

Segment Discussion

The consensus estimate indicates that sales of Aegion’s Infrastructure Solutions segment (comprising 41% of the company’s revenues) will reach $155 million in the quarter, reflecting around 4.7% year-over-year growth. Benefits from further penetration into the pressure pipe market on the back of new product development, investments in underserved North America CIPP (cured-in-place pipe) regions and improved product sales are expected to reflect in the segment’s results.

Aegion’s Corrosion Protection segment will be buoyed by focus on improved project execution and labor utilization. However, rising energy and labor costs might have affected the segment’s margin performance. The Zacks Consensus Estimate for this segment’s net sales is pegged at $100 million for the quarter to be reported, down nearly 22% from $128 million reported in the prior-year quarter.

Further, quarterly sales for the Energy Services segment are expected to be $74 million, down around 5.1% year over year. The segment is anticipated to grow predominantly on restructuring efforts. However, restructuring charges and cost inflation remain concerns.

Earnings Whispers

Our proven model does not show that Aegion is likely to beat on earnings in the to-be-reported quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: The company’s Earnings ESP is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at 39 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Aegion currently carries a Zacks Rank #3. While this increases the predictive power of ESP, we also need to have a positive ESP to be confident about an earnings surprise.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the same sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported:

Armstrong World Industries, Inc. AWI has an Earnings ESP of +1.73% and carries a Zacks Rank #2. The company is slated to report quarterly numbers on Jul 31, 2018. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fluor Corporation FLR has an Earnings ESP of +1.45% and carries a Zacks Rank #3. The company is scheduled to report quarterly numbers on Aug 2, 2018.

GCP Applied Technologies Inc. GCP has an Earnings ESP of +2.56% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Aug 7, 2018.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

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

To read this article on Zacks.com click here.

Zacks Investment Research