McCoy Global is a buy, this analyst says

Beacon Securities analyst Russell Stanley maintained a “Buy” rating and $5.50 target on McCoy Global (McCoy Global Stock Quote, Chart, News, Analysts, Financials TSX:MCB) in a May 20 report, saying first-quarter results were below his forecast but the company’s Middle East opportunities remain intact.

McCoy develops and sells equipment used for tubular running services, handling, connecting and installing pipe, casing and tubing during oil and gas drilling and well construction.

McCoy reported Q1 revenue of $9.4-million and Adjusted EBITDA of negative $1.3-million, below Stanley’s estimates of $10.5-million and positive $0.5-million. Stanley said the miss was mainly due to stronger-than-expected margin compression as lower revenue reduced scale benefits before cost reductions had time to flow through.

Revenue fell 52% year-over-year and 63% sequentially, reflecting shipping and revenue recognition delays tied to the Middle East conflict and the suspension of shipping through the Strait of Hormuz. Stanley said about two-thirds of McCoy’s $26-million backlog entering the quarter was tied to Middle East shipments.

He expects cost reductions announced in March, including $2.6-million in annual operating expense savings and the suspension of a dividend that cost $2.7-million annually, to become more visible in Q2 and Q3.

Stanley said the key question is when Middle East shipping resumes. About 30% of the company’s $23-million exit backlog is destined for the region, while two major sales opportunities tied to eventual awards of about 100 rigs and 200 rigs remain intact.

Stanley also said the UAE’s decision to exit OPEC+ signals an intent to increase production beyond pre-conflict levels, which would support McCoy’s demand outlook.

He expects McCoy to generate Adjusted EBITDA of $5-million on revenue of $56-million in fiscal 2026, improving to $23-million on revenue of $99-million in fiscal 2027.

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