Helmerich & Payne (HP) Down 10.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Helmerich & Payne (HP). Shares have lost about 10.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Helmerich & Payne due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Helmerich & Payne Q3 Earnings Beat Estimates
Helmerich & Payne reported fiscal third-quarter 2023 adjusted earnings of $1.09 per share, which beat the Zacks Consensus Estimate of 89 cents. In the year-ago period, the company had reported a profit of 27 cents per share. The outperformance reflects a significant uptick in HP’s North America Solutions segment.
Operating revenues of $724 million outpaced the Zacks Consensus Estimate of $702 million. The figure also increased 31.6% from the year-ago quarter’s level due to strong results from the North America Solutions and International Solutions segments.
In good news for investors, Helmerich & Payne is using the excess cash from a supportive environment to reward investors with dividends and buybacks. HP’s board of directors declared a quarterly cash dividend of 25 cents per share to its common shareholders of record as on Aug 17. The payout will be made on Aug 31. In addition to the regular dividend, HP declared a supplemental dividend of 23.5 cents per share.
During the fiscal third quarter, Helmerich & Payne repurchased about 3.2 million shares for approximately $103 million, bringing the year-to-date share repurchase total for fiscal 2023 to about 6.5 million for about $249 million.
Segmental Performance
North America Solutions: Operating revenues of $641.6 million were up 32% year over year on higher activity levels, with the average number of active rigs at 166. The figure beat our projection of $607.5 million.
Operating profit totaled $169.5 million compared with $57.4 million in the corresponding period of 2022. The figure also beat our estimate of $119.4 million. This improvement can be attributed to an increase in drilling activities owing to the surging oil and gas prices.
Offshore Gulf of Mexico: Revenues of $31.2 million decreased 4.6% from the year-ago quarter’s level of $32.7 million. The figure also missed our projection of $35.6 million.
Operating profit totaled $4.7 million, down 20% from that recorded in the prior-year period. The figure also missed our estimate of $6.7 million.
International Solutions: Sales in this segment increased to $48.7 million from $29.1 million in the comparable period of 2022. The figure, however, missed our projection of $54.7 million.
The unit incurred a loss of $1.4 million, narrower than the reported loss of $6.6 million in the prior-year period. The figure outperformed our estimate of a loss of $2 million.
Financial Position
In the reported quarter, HP spent $281.8 million on capital programs. As of Jun 30, 2023, the company had $220.6 million in cash and cash equivalents, while the long-term debt was $545 million (debt-to-capitalization of 16.8%).
Guidance
Helmerich & Payne expects operating gross margin for the North America Solutions, Offshore Gulf of Mexico and International Solutions segments in the range of $230-$250 million, $6-$8 million, and $8-$11 million, respectively, for the fiscal fourth quarter. The company anticipates 141-147 contracted rigs at the end of the quarter.
HP predicts capital expenditure of $400 million for 2023. It also estimates its research and development costs to be $30 million, and depreciation and amortization costs to be $385 million for the entire year.
Cash taxes are anticipated to be in the range of $180-$205 million. General and administrative costs are projected to be $205 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
The consensus estimate has shifted -8% due to these changes.
VGM Scores
Currently, Helmerich & Payne has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Helmerich & Payne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Helmerich & Payne, Inc. (HP) : Free Stock Analysis Report
