How are energy investors positioned?
On Thursday, Stifel analysts adjusted their outlook on MRC Global (NYSE:MRC), reducing the company’s price target from $16.00 to $14.00, while still upholding a Buy rating on the stock. Currently trading at $10.24, the stock appears undervalued according to InvestingPro analysis, with analyst targets ranging from $13 to $17. Want deeper insights? InvestingPro offers comprehensive valuation analysis and 10 additional key tips for MRC Global. This move follows MRC Global’s preliminary financial results for the first quarter of 2025, which surpassed both Stifel’s and Wall Street’s expectations.
MRC Global announced preliminary revenue for the first quarter of 2025 at approximately $710 million, outpacing Stifel’s projection of $680.0 million and the Street’s forecast of $679.8 million. The company’s adjusted EBITDA was around $35 million, again exceeding Stifel’s estimate of $26.5 million and the Street’s expectation of $30.3 million. Cash flow from operations (CFO) was reported to be approximately $20 million, a significant improvement compared to Stifel’s anticipated -$46.7 million and the Street’s estimate of $5.8 million. The company maintains a healthy financial position with a current ratio of 1.81, indicating strong liquidity, and has demonstrated robust cash generation with a free cash flow yield of 28%.
The company’s strong performance in the quarter was noted, with second-quarter sales guidance aligning with consensus expectations. Despite the positive results, Stifel expressed concerns about potential macroeconomic weaknesses affecting the upstream business segments in the latter half of the year. However, they anticipate that the recovery in the Gas Utilities sector, along with supportive policy measures and the impact of inflation and tariffs, should more than compensate for any downturns. InvestingPro data shows the company maintains a "GOOD" overall financial health score, with particularly strong ratings in relative value and profit metrics.
Stifel analysts believe that accelerating inflation could act as a tailwind for the company’s margins. As a result of the latest financial outcomes and market conditions, Stifel has updated their estimates to account for the potential impact of U.S. trade policies and lower oil prices, which may lead to a modest slowdown in growth during the second half of 2025. Despite the reduced price target, the firm’s continued endorsement of a Buy rating indicates confidence in MRC Global’s ongoing performance, supported by its gross profit margin of 20.59% and strong return on invested capital of 9%.
In other recent news, MRC Global reported fourth-quarter earnings that fell short of analyst expectations, with a loss of $0.14 per share compared to the anticipated profit of $0.10. Revenue for the quarter was $664 million, missing the consensus estimate of $734.1 million and marking a 10% year-over-year decline. Despite this, MRC Global announced a joint venture with Frisbie Measurement Services to form IMTEC Services, aimed at providing smart meter technical services to gas utilities customers. The company also disclosed the sale of its Canadian operations to Emco Corporation, as part of its strategy to optimize its portfolio. Analysts from Loop Capital and Stifel have maintained a Buy rating on the stock, with price targets of $17 and $16, respectively. Loop Capital noted MRC Global’s strategic initiatives, including a $125 million share repurchase program and the divestiture of its Canadian business, as positive steps. Stifel highlighted improvements in daily order rates and backlog, which are expected to drive revenue growth in the second quarter of 2025. MRC Global’s full-year 2024 results showed sales of $3.01 billion and net income of $78 million, with plans to generate at least $100 million in operating cash flow in 2025.
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