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Silica Holdings (SLCA) Up 8.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Silica Holdings (SLCA). Shares have added about 8.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Silica Holdings due for a pullback? 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.

U.S. Silica’s Q4 Earnings & Revenues Beat Estimates

U.S. Silica reported a net profit of $4.6 million or 6 cents per share in fourth-quarter 2020 against net loss of $292.9 million or $3.99 per share in the year-ago quarter.

Barring one-time items, adjusted loss per share was 26 cents, which was narrower than the Zacks Consensus Estimate of a loss of 35 cents.

U.S. Silica generated revenues of $227.3 million, down 33% year over year. However, the figure surpassed the Zacks Consensus Estimate of $194.6 million.

Segment Highlights

Revenues in the Oil & Gas division amounted to $120.3 million in the fourth quarter, down 49% year over year and up 81% sequentially. Overall sales volume fell 43% year over year to 1.901 million tons. Oil & Gas contribution margin increased 64% sequentially and declined 24% year over year to $51.5 million or $27.10 per ton.

Revenues in the Industrial & Specialty Products division amounted to $106.9 million in the fourth quarter, up 2% year over year. Overall sales volume increased 10% year over year to 0.926 million tons. The segment’s contribution margin was $38.4 million or $41.47 per ton in the quarter, down 9% sequentially and down 2% year over year.

FY20 Results

Loss (as reported) for full-year 2020 was $1.55 per share compared with $4.49 per share a year ago. Net sales declined 43% year over year to $845.9 million.

Financials

At the end of the year, the company’s cash and cash equivalents were $150.9 million, down 18.7% year over year. Long-term debt was $1,197.7 million, down 1.3% year over year.

Outlook

For 2021 and beyond, U.S. Silica predicts a sustainable long-term growth by serving key industries like food and beverage, production, housing automotive, glass manufacturing, biopharma and energy. It is focused on prioritizing free cash flow, repositioning its Oil & Gas segment and growth of its Industrial and Specialty Products segment.

The company plans to deliver positive cash flow in 2021 and deleverage its balance sheet, keeping $30-40 million of capital expenditures within operating cash flow.

The Industrial & Specialty Products segment started 2021 on a positive note and the company expects growth to outpace U.S. GDP. U.S. Silica has taken initiatives to reduce costs in the Oil & Gas segment. It also expects a strong recovery in energy sector proppant and last mile delivery demand in the first half of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 8.33% due to these changes.

VGM Scores

Currently, Silica Holdings has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Silica Holdings has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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