Shares of MRC Global(NYSE: MRC) spiked today after the supplier to the oil and gas industry reported fourth-quarter earnings last night. And there might be more to come. Shares jumped nearly 15% this morning and were still higher by 12.3% as of 1:10 p.m. ET.
There were several things to like about the quarterly report, and MRC Global stock still looks inexpensive for those who want exposure to the U.S. oil and gas energy sector.
Three straight years of revenue growth
MRC supplies the oil and gas industry with essential equipment, including pipes, valves, fittings, and other infrastructure products. When oil prices are high, companies ramp up drilling, and demand for MRC's equipment spikes.
But drillers in the U.S. have become more and more efficient, producing more oil and gas from fewer new wells over the past year. They need MRC Global to keep up those productivity gains.
Trimming debt at the right time
That showed in MRC's fourth-quarter and full-year 2023 results. The company grew revenue for the third straight year with sales of over $3.4 billion. The company's performance has led to a gain of nearly 30% in MRC Global stock over the past six months. But there might be more to come.
That's because the company is generating plenty of operating cash flow and now has the lowest debt level in its history as a public company. The even better news is that is now in a position to pay off a term loan prior to its maturity in September to avoid having to refinance at higher interest rates.
MRC's net debt was just $170 million as of Dec. 31, and cash from operations totaled $181 million in 2023. That's during a time when oil prices hovered around $80 per barrel.
For those wanting exposure to the energy sector and who believe oil could maintain this price level or move higher, MRC Global is in a fine position to continue generating cash. With its price-to-earnings ratio still only around 11 with today's jump, it could be a good time to own some shares of MRC Global.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
