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MRC Global Inc. MRC has been witnessing strength in the DIET sector, driven by an increase in energy transition projects (from carbon-based energy to alternative forms of energy). The company is expected to benefit from increased customer activity levels related to maintenance, repair and operations activities. Also, a strong pipeline of refining, chemical and mining customer projects bodes well.
The company intends to augment its shareholders’ wealth through dividend payouts and share repurchases. In the first nine months of 2024, it paid dividends of $18 million and repurchased shares worth $5 million. In January 2025, MRC Global announced rewards for shareholders in the form of share buyback authorization. Under the buyback program, the company has been authorized by its board of directors to repurchase up to $125 million worth of shares. MRC expects to begin executing the buyback program in the second quarter and it will remain valid till Jan. 2, 2028.
Also, its strong free cash flow generation capacity enables it to reward its shareholders. In the first nine months of 2024, the company generated a free cash flow of $174 million compared with $82 million in the year-ago period.
Reduction of debts remains a priority for the company. In the first nine months of 2024, MRC repaid $276 million in borrowings under revolving credit facilities. In 2023, it repaid $882 million in borrowings under revolving credit facilities. Also, MRC Global’s focus on reducing its leverage ratio is evident as the metric was 0.1x at the end of the third quarter, the lowest in its history.
MRC’s Price Performance
Image Source: Zacks Investment Research
Shares of the Zacks Rank #3 (Hold) company have gained 38.7% compared with the industry’s 28.5% growth in the past year.
However, MRC Global has been witnessing weakness in the Gas Utilities and Production & Transmission Infrastructure (PTI) sectors. Continued customer destocking is affecting the Gas Utilities sector. Also, higher interest rates and inflation in construction costs are causing customers to delay project activity. Revenues from the Gas Utilities sector declined 6% year over year in the third quarter.
Decreases in rig counts in the U.S. oil field due to the widespread consolidation of producers, particularly in the Permian Basin and low natural gas prices, are affecting the PTI sector. Revenues from the PTI sector decreased 14% year over year in the third quarter.
Key Picks
We have highlighted three better-ranked stocks, namely Powell Industries POWL, Tenaris TS and Enersys ENS. While Powell Industries currently sports a Zacks #1 Rank (Strong Buy), Tenaris and Enersys carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Powell Industries delivered a trailing four-quarter average earnings surprise of 57.6%. In the past 60 days, the Zacks Consensus Estimate for POWL’s fiscal 2025 earnings has increased 10.1%.
Tenaris has a trailing four-quarter average earnings surprise of 24.5%. The consensus estimate for TS’ 2024 earnings has risen 1.2% in the past 60 days.
Enersys delivered a trailing four-quarter average earnings surprise of 1.6%. In the past 60 days, the consensus estimate for ENS’ 2024 earnings has improved 5.3%.