Patterson-UTI (PTEN) Down 10.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Patterson-UTI (PTEN). Shares have lost about 10.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Patterson-UTI 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 drivers.
Patterson-UTI Q3 Earnings Miss, Sales Beat
Patterson-UTI Energy reported third-quarter 2023 adjusted net profit of 20 cents per share, which missed the Zacks Consensus Estimate of 26 cents. The bottom line also declined from the year-ago quarter's level of 28 cents. This underperformance can be attributed to poor operating income in the Completion Services, Drilling Products and Other Operations segments.
Total revenues of $1 billion beat the Zacks Consensus Estimate of $978 million. The top line also improved 38.9% on a year-over-year basis. This outperformance can be attributed to PTEN's improved revenue contribution in the Drilling Services segment.
Patterson-UTI will pay its quarterly dividend of 8 cents per share on Dec 15, 2023, to shareholders of record as of Dec 1, 2023. Its share repurchase authorization had $281 million left as of Sep 30, 2023.
Segmental Performances
Drilling Services: Revenues in this segment totaled $488.8 million, up 16.9% from the prior-year quarter’s figure of $418 million. The figure also beat our projection of $393.8 million. This was due to the continued renewal of drilling rig contracts. Operating profit amounted to $114.7 million compared with $46.5 million in the third quarter of 2022. The figure also beat our estimate of $93 million.
Completion Services: This segment’s revenues of $459.6 million rose about 59.7% from the year-ago quarter’s figure of $287.7 million due to better pricing. However, the figure missed our projection of $503.4 million.
Operating profit totaled $162,000 compared with $48.9 million in the third quarter of 2022. The figure missed our estimate of $4.5 million.
Drilling Products: Revenues totaled $46.6 million, with an operating loss of $6.2 million. The reported figure includes the performance of Ulterra Drilling Technologies, which was acquired in the last 48 days of the quarter.
Other Services: Revenues amounted to $16.5 million, 24.3% lower than the year-ago quarter’s figure of $21.8 million. Operating profit amounted to $435,000 compared with $4 million in the third quarter of 2022.
Capital Expenditure & Financial Position
In the reported quarter, PTEN spent $160.4 million on capital programs compared with $126.4 million in the prior year period. As of Sep 30, 2023, the company had cash and cash equivalents worth $67 billion and long-term debt of $1,228,209 million.
Outlook
Patterson-UTI anticipates 120 active U.S. rigs in the Drilling Services segment, with an average of 118 U.S. rigs operating in the fourth quarter. The company expects sequential activity to outperform the industry average in the fourth quarter.
PTEN projects U.S. Contract Drilling revenue per day of $35,400 and cost per day of $19,300, for an adjusted gross margin per operating day of $16,100. Revenues from Contract Drilling and Other Drilling Services in the United States are expected to be $65 million, with direct operating costs of $55 million and a gross margin of $10 million.
Completion Services revenues are expected to be around $950 million in the fourth quarter, with direct operating costs of approximately $750 million and an adjusted gross margin of around $200 million.
Drilling Products revenues are expected to be around $90 million in the fourth quarter, with direct operating costs of $60 million and an adjusted gross margin of $30 million.
Patterson-UTI anticipates $10 million in non-cash direct operating costs associated with the value step-up at Ulterra, which would reduce our segment-adjusted gross margin expectation to $40 million.
The company expects selling, general and administrative expenses to be $65 million in the fourth quarter. It also anticipates a depreciation and amortization expense of $260 million in the same time frame. Patterson-UTI expects to pay approximately $5 million in cash taxes in the same quarter.
Patterson-UTI anticipates total capital expenditures of $190 million in the fourth quarter, including $65 million for Drilling Services, $110 million for Completion Services, $10 million for Drilling Products and $5 million for Other and Corporate.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -39.21% due to these changes.
VGM Scores
Currently, Patterson-UTI has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Patterson-UTI has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Patterson-UTI Energy, Inc. (PTEN) : Free Stock Analysis Report
