Hi-Crush Partners LP (HCLP) Down 8.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Hi-Crush Partners LP (HCLP). Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hi-Crush Partners LP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hi-Crush's Q4 Earnings Miss, Revenues Beat Estimates

Hi-Crush incurred net loss of $9.9 million or 8 cents per share in fourth-quarter 2018, against net income of $41.9 million or 47 cents in the year-ago quarter. The figure was wider than the Zacks Consensus Estimate of a loss of 6 cents.

Revenues plunged roughly 25% year over year to $162.2 million. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $149.3 million. Lower pricing and reduced volumes are attributable to decline in revenues.

Notably, lower pricing was the result of the slowdown in demand for frac sand that started during the third quarter and continued into the fourth quarter, due to reduced well completion activity.

Total frac sand sold during the quarter was 1,976,805 tons, down 33.8% year over year. Contribution margin per ton sold was down 38.8% year over year to $14.35. Average sales price was $58 per ton, down 18.3% year over year.

Sales volumes to E&Ps contributed 51% to total sales, compared with 40% in the third quarter of 2018. Also, 36% of the total sales volumes were sold at the wellsite through PropStream compared with 24% in the third quarter.

2018 Highlights

In 2018, revenues jumped around 39.9% year over year to $842.8 million. The partnership generated a net income of $137.6 million or $1.42 per share, up from $76.2 million or 96 cents a year ago.

Total frac sand sold in 2018 was 10,407,296 tons, up 16.4% year over year. Contribution margin per ton sold rose 38.5% on a year-over-year basis to $25.45.

Operational Update

As of Dec 31, 2018, the partnership had 16 PropStream container crews in the Permian Basin and Marcellus/Utica. Also, it had 8 FB silo systems operating in the Permian. During the fourth quarter, the deployment of PropStream crews was affected by delays in contract start-ups due to budget timing considerations of customers. Hi-Crush successfully completed field testing for the new FB Atlas top-fill conveyor system with an existing E&P customer in the Permian.

Construction of the second Kermit facility was completed during the quarter, marking an increase in capacity to 6 million tons per annum. The partnership expects to reach full run-rate on the second Kermit facility in March 2019.

Financial Position

As of Dec 31, 2018, the partnership had $114.3 million in cash and $58.2 million in available capacity under the revolving credit facility.

Hi-Crush had outstanding long-term debt of roughly $445.5 million as of Dec 31, up from $197.4 million a year ago.

Distribution

On Jan 7, the partnership’s board decided to suspend quarterly distribution considering the challenging environment.

 

Outlook

The partnership expects total sales volumes for the first quarter in the range of 2.4-2.6 million tons. Notably, the projections reflect a sequential increase driven by additional volumes sold from the second Kermit facility along with increasing Northern White volumes associated with the new E&P contracts.

Moreover, the partnership expects average sand pricing to remain unchanged in the first quarter, irrespective of higher activity levels.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 81.06% due to these changes.

VGM Scores

At this time, Hi-Crush Partners LP has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Hi-Crush Partners LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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