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Aegion (AEGN) Withdraws 2020 Guidance Amid Coronavirus Fears

Zacks Equity Research

In view of significant uncertainty arising from novel coronavirus outbreak, Aegion Corporation AEGN announced the withdrawal of its full-year 2020 guidance. Moreover, to mitigate the financial impact of the ongoing COVID-19 pandemic, the company has initiated certain actions to reduce operating expenses.

Charles R. Gordon, Aegion’s president and CEO, said, “We’ve been pleased to date with our ability to respond to current events amid significant volatility. However, we do not believe a ‘wait and see’ approach is appropriate. Though very difficult, we believe the swift and decisive actions we have taken will ensure the organization is able to weather this unprecedented global crisis.”

Key Takeaways

Aegion’s management has been undertaking prudent actions to slash expenses, boost liquidity and improve financial flexibility to ensure that the company is well positioned to face the crisis. These actions include wage reductions; freezing of all non-critical spending for capital expenditures, travel and other discretionary expenses; and suspension of cash fees for the company’s board of directors and the discretionary open-market share repurchase program.

The company also drew $35 million on its revolving line of credit in the first quarter to provide a cushion against any unforeseen liquidity disruptions.

Notably, Aegion ended 2019 with more than $66 million in cash balances and almost $40 million in borrowing capacity on its line of credit. Its focus on rehabilitation and maintenance activities enabled the company to reduce its dependence on new construction activity, as well as risks in cyclical markets. Notably, rehabilitation and maintenance activities accounted for 85% of total 2019 revenues. Also, Aegion’s exposure to upstream oil and gas markets represents less than 10% of total revenues.

The company also highlighted the fact that although multiple federal, state and local jurisdictions globally have issued ‘stay at home’ orders owing to the coronavirus pandemic, many orders are currently allowing individuals to perform work that are crucial for operation and maintenance of ‘essential infrastructure,’ which includes water, sewer, gas and sanitation services, as well as oil refining and oil and gas operations, among other activities. Hence, this has allowed many Aegion field crews to continue working, thereby resulting in limited disruption in operations to date.

Despite successfully navigating market challenges, Aegion is preparing for a protracted period of significant uncertainty. Given difficulties in estimating the financial impact of the coronavirus outbreak, Aegion withdrew its 2020 financial guidance issued on Feb 28, 2020.

So far this year, shares of the company have declined 33.4% compared with the industry’s and S&P 500’s 34.3% and 21.1% decline, respectively.



Zacks Rank & Key Picks

Aegion currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include Gibraltar Industries, Inc. ROCK, Installed Building Products, Inc. IBP and Armstrong World Industries, Inc. AWI. While Gibraltar and Installed Building Products sport a Zacks Rank #1, Armstrong World carries a Zacks Rank #2 (Buy).

Gibraltar, Installed Building Products and Armstrong World are expected to register 16.7%, 15.5% and 8.8% growth in EPS this year, respectively.

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Aegion Corporation (AEGN) : Free Stock Analysis Report
 
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