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ProPetro (PUMP) Down 41.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for ProPetro Holding (PUMP). Shares have lost about 41.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ProPetro 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.

ProPetro Misses on Q2 Earnings, Revenues Beat

ProPetro Holding reported mixed second-quarter 2019 results, wherein earnings missed the Zacks Estimate but revenues topped the same.
 
Its net income per share came in at 35 cents, lagging the Zacks Consensus Estimate of 66 cents and declining from the year-ago figure of 45 cents. Lower adjusted EBITDA from the pressure pumping division and high costs led to underperformance. To be precise, adjusted EBITDA from the pressure pumping unit came in at $131 million, missing the consensus estimate of $138 million.
 
Total adjusted EBITDA in the second quarter amounted to $126.6 million, increasing substantially from $96 million a year ago but declining from $150.3 million recorded in the first quarter. In the reported quarter, ProPetro’s adjusted EBITDA margin was 23.9% compared with 21% and 27.5% recorded in second-quarter 2018 and first-quarter 2019, respectively.
 
The company’s revenues of $529.5 million improved 15.1% year over year and outpaced the Zacks Consensus Estimate of $524 million.

Pressure Pumping Division

ProPetro, through its Pressure Pumping division, performs hydraulic fracturing, cementing and acidizing functions. The business accounted for 97.4% of the company's total revenues in the quarter under review.
 
Effective utilization of its fracturing assets was 25.6 fleets during the quarter. ProPetro expects an average of 25 effective fleets in the third quarter, down from 25.6 in second-quarter 2019 amid decrease in customer activities.
 
As we know, the company is making its foray in the electric fracking technology, with the deployment of three DuraStim fleets. Set to be delivered by late 2019, these 36,000 horsepower DuraStim fleets — boasting fuel efficiency and lower costs — will be deployed under dedicated agreements with clients.   
 
Costs & Expenses
 
ProPetro’s total costs and expenses in the quarter under review were $480.7 million compared with $406.3 million in the year-ago period. The company reported cost of services of $386.2 million, 9.8% higher than the year-ago quarter. General and administrative expenses came in at around $27.8 million, up from $14.2 million in the year-ago period. Depreciation charges increased to $35.5 million from $21.3 million in the second quarter of 2018.
 
Capex & Balance Sheet
 
Capital expenditure amounted to $161.2 million. As of Jun 30, ProPetro had cash and cash equivalents of $36.3 million, and a long-term debt of $150 million. The company’s debt-to-capitalization ratio was 14.2%. ProPetro has $110.2 million of available capacity under the revolving credit facility.

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 -8.84% due to these changes.

VGM Scores

Currently, ProPetro has a great Growth Score of A, 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, ProPetro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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