Patterson-UTI (PTEN) Down 2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Patterson-UTI (PTEN). Shares have lost about 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 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 the most recent earnings report in order to get a better handle on the important catalysts.
Patterson-UTI Q4 Earnings & Sales Beat
Patterson-UTI Energy reported fourth-quarter 2023 adjusted net profit of 19 cents per share, which beat the Zacks Consensus Estimate of 18 cents. This outperformance can be attributed to the impressive performance of the Completion Services and Drilling Services segments. However, the bottom line declined from the year-ago quarter's level of 46 cents. This underperformance can be attributed to poor contribution from the Other Operations segment.
Total revenues of $1.6 billion beat the Zacks Consensus Estimate of $1.5 billion. The top line also improved 100.9% on a year-over-year basis. This outperformance can be attributed to PTEN's improved revenue contribution from its Completion Services segment on a year-over-year basis.
Patterson-UTI will pay its quarterly dividend of 8 cents per share on Mar 15, 2024, to shareholders of record as of Mar 1, 2024. Its share repurchase authorization had $1 billion left as of Dec 31, 2023.
Segmental Performances
Drilling Services: Revenues in this segment totaled $463.6 million, up 0.4% from the prior-year quarter’s figure of $461.5 million. The figure also beat our projection of $387.6 million. Operating profit amounted to $92.7 million compared with $81.2 million in the fourth quarter of 2022. However, the figure was lower than our estimate of $97 million.
Completion Services: This segment’s revenues of $1 billion rose about 230.6% from the year-ago quarter’s figure of $306.8 million due to better pricing. The figure also exceeded our expectation of $949.6 million.
Operating profit totaled $70.3 million compared with $58.6 million in the fourth quarter of 2022. However, the figure was lower than our estimate of $81.9 million.
Drilling Products: Revenues totaled $88.1 million, with an operating loss of $261,000. The fourth quarter marked PTEN's first complete reporting period following its acquisition of Ulterra Drilling Technologies.
Other Services: Revenues amounted to $18.3 million, 9.4% lower than the year-ago quarter’s figure of $20.2 million. Operating profit amounted to $1 million compared with $3.5 million in the fourth quarter of 2022.
Capital Expenditure & Financial Position
In the reported quarter, PTEN spent $205.3 million on capital programs compared with $119.2 million in the prior-year period. As of Dec 31, 2023, the company had cash and cash equivalents worth $192.7 million and long-term debt of $1.2 billion.
Outlook
Patterson-UTI expects oil basin activity to remain relatively steady throughout 2024, while natural gas basins could experience a negative impact from current low prices.
In the Drilling Services segment, the company looks forward to operate an average of 120 U.S. rigs in the first quarter of 2024, up from 118 in the previous quarter. It expects first-quarter Drilling Services adjusted gross profit to be relatively flat quarter over quarter.
Completion Services segment revenues are expected to be in the range of $940-$950 million, with approximately $750 million in direct operating costs and an adjusted gross profit of $190-$200 million.
In the Drilling Products segment, demand is expected to remain steady through the first quarter. Revenues are expected to be approximately $90 million, with $50 million in direct operating costs and an adjusted gross profit of $40 million.
In the Other segment, revenues and adjusted gross profit are expected to be flat sequentially.
Patterson-UTI expects selling, general, and administrative expenses of approximately $65 million and depreciation, depletion, amortization, and impairment expenses of approximately $280 million for the first quarter.
For 2024, PTEN expects an effective tax rate of 24%, with annual cash taxes in the $35-$45 million range. The company also anticipates spending around $740 million on capital expenditures. This allocation includes $285 million for Drilling Services, $360 million for Completion Services, $55 million for Drilling Products, and $40 million for Other and Corporate purposes.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -45.34% due to these changes.
VGM Scores
At this time, Patterson-UTI has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Patterson-UTI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Patterson-UTI is part of the Zacks Oil and Gas - Drilling industry. Over the past month, Nabors Industries (NBR), a stock from the same industry, has gained 6.9%. The company reported its results for the quarter ended December 2023 more than a month ago.
Nabors reported revenues of $737.84 million in the last reported quarter, representing a year-over-year change of -4.1%. EPS of -$3.84 for the same period compares with -$3.89 a year ago.
For the current quarter, Nabors is expected to post a loss of $1.98 per share, indicating a change of -260% from the year-ago quarter. The Zacks Consensus Estimate has changed -14.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Nabors. Also, the stock has a VGM Score of A.
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