A month has gone by since the last earnings report for RPC (RES). Shares have lost about 23.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RPC 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.
RPC Q1 Earnings and Revenues Miss Estimates, Dividend Cut
RPC reported first-quarter 2019 breakeven earnings per share, lagging the Zacks Consensus Estimate of 3 cents. The bottom line also declined from the year-ago level of 24 cents.
Total revenues of $334.7 million missed the Zacks Consensus Estimate of $345 million. Moreover, the top line declined from the year-ago figure of $436.3 million.
The weak fourth-quarter results were primarily attributable to lower activity levels and pricing, especially in the company’s biggest service line, the pressure pumping service business.
It slashed quarterly cash dividend to 5 cents per share from 10 cents due to the current uncertainty in the oilfield market. The dividend is payable on Jun 10 to its shareholders of record as of May 10. The company is planning to use this dividend cut as an opportunity to strengthen the capital structure and keep its balance sheet healthy.
Operating loss from the Technical Services segment came in at $4.5 million, down from the year-ago profit level of $65 million. The decline was mainly caused by lower activity levels in many of the larger service lines and lower pricing in the pressure pumping service line.
Contrarily, operating profit from the Support Services segment came in at $3.1 million against the year-ago loss of $0.9 million. The improvement was backed by enhanced activity levels and pricing in the rental tool service line. Rental tool service line, being the largest service line in the segment, has considerable weightage.
Cost and Expenses
Cost of revenues plunged from $295.6 million in first-quarter 2018 to $252.4 million due to fall in the expenses of materials and supplies in the company’s pressure pumping service business. Declining maintenance and repair costs due to overall lower activity levels supported the cost of revenues.
Selling, general and administrative costs rose to $45.4 million in the reported quarter from $43.8 million in the year-ago period.
The company bought back around 55,942 outstanding shares in the first quarter. Currently, it has around 212.5 million shares outstanding.
RPC’s total capital expenditure in the first quarter of 2019 amounted to $62.3 million.
As of Mar 31, the company had cash and cash equivalents of $113 million and no long-term debt.
RPC revealed that the average domestic rig count in the reported quarter increased 8% year over year to 1,043. The company stated that oil price in the quarter averaged $54.58 per barrel, reflecting a 13.3% year-over-year decrease. Also, average price of natural gas was recorded at $2.92 per thousand cubic feet, 7.6% lower than the year-ago level.
The company expects the pressure pumping market to continue being oversupplied, primarily due to increasing efficiency achieved by completion services providers. However, improving oil prices and upcoming Permian Basin bottleneck reliever projects can act as positive catalysts and improve market demand in the near term.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, RPC has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, RPC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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