Will NexTier Merger Boost Patterson-UTI's (PTEN) Q3 Earnings?
Patterson-UTI Energy PTEN is set to release third-quarter results on Nov 7. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 26 cents per share on revenues of $978.2 million.
Let’s delve into the factors that might have influenced the onshore contract driller’s performance in the September quarter. But it’s worth taking a look at PTEN’s previous-quarter results first.
Highlights of Q2 Earnings & Surprise History
In the last reported quarter, the Houston, TX-based provider of onshore oilfield services and products to energy companies met the consensus mark on the back of impressive performance from the Contract Drilling segment. Patterson-UTI had reported earnings per share of 44 cents, same as the Zacks Consensus Estimate. Revenues of $758.9 million, however, came in 2.8% below the consensus mark due to lower-than-expected sales of PTEN’s Pressure Pumping, Directional Drilling and Other Operations segments.
PTEN beat the Zacks Consensus Estimate for earnings thrice in the last four quarters and met in the other, resulting in an earnings surprise of 20.5%, on average. This is depicted in the graph below:
Trend in Estimate Revision
The Zacks Consensus Estimate for the third-quarter bottom line has been revised 3.7% downward in the past seven days. The estimated figure indicates a 7.1% fall year over year. However, the Zacks Consensus Estimate for revenues suggests a 34.5% increase from the year-ago period.
Factors to Consider
Patterson-UTI Energy is expected to have reaped the reward of higher revenues and margins in its Contract Drilling segment. Taking into account the healthy rig counts and contract renewals, our expectation for PTEN’s average third-quarter revenues and gross margin per operating day are pegged at $35,980 and $16,580, respectively, up from the year-ago quarter’s levels of $28,670 and $10,470.
Further, the merger with NexTier Oilfield Solutions is also likely to have buoyed Patterson-UTI’s revenues and cash flows. With sharply increased exposure to NexTier’s fracking expertise, PTEN’s Pressure Pumping segment’s sales are expected to have benefited significantly. Going by our model, the unit’s third-quarter revenues are pegged at $503.4 million compared to $287.7 million achieved in the third quarter of 2022.
But on a somewhat bearish note, a rise in expenses might have dampened the abovementioned positives. In particular, our estimate for direct operating costs is pegged at $710.2 million, indicating a 41.9% jump from $500.6 million reported in the year-ago quarter. Our model also predicts the company’s total operating expenses to go up 37.7% year over year to $896.8 million. The upward cost trajectory can be attributed to the prevailing inflationary environment, acquisition-related costs and stacking of rigs.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Patterson-UTI is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -8.28%.
Zacks Rank: PTEN currently carries a Zacks Rank #2.
Stocks to Consider
While an earnings beat looks uncertain for Patterson-UTI, here are some firms that you may want to consider on the basis of our model:
AirSculpt Technologies, Inc. AIRS has an Earnings ESP of +11.11% and a Zacks Rank #2. The firm is scheduled to release earnings on Nov 10.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The 2023 Zacks Consensus Estimate for AirSculpt Technologies indicates 13.5% year-over-year earnings per share growth. Valued at around $371.4 million, AIRS has gained 26.3% in a year.
Applied Materials, Inc. AMAT has an Earnings ESP of +0.86% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov 16.
Over the past 90 days, Applied Materials saw the Zacks Consensus Estimate for fiscal 2023 move up 7.6%. Valued at around $117.3 billion, AMAT has gained 47% in a year.
Astria Therapeutics ATXS has an Earnings ESP of +13.73% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov 13.
Astria Therapeutics beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 9.9%, on average. Valued at around $138.5 million, ATXS has lost 41.1% in a year.
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Patterson-UTI Energy, Inc. (PTEN) : Free Stock Analysis Report
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
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AirSculpt Technologies, Inc. (AIRS) : Free Stock Analysis Report
