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U.S. Silica's (SLCA) Stock Rises on Earnings Beat in Q3

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Zacks Equity Research
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U.S. Silica Holdings, Inc. SLCA shares rose 2.7% on Oct 29, after the company reported better-than-expected third-quarter 2020 earnings. The bottom line for the quarter surpassed the Zacks Consensus Estimate. The company benefited from increased frac activity and well completions as well as improved demand across key industrial end markets in the quarter.

Earnings and Revenues Discussion

U.S. Silica reported a net loss of $14 million or 19 cents per share in the third quarter, narrower than a net loss of $23 million or 31 cents per share in the year-ago quarter.

Barring one-time items, adjusted loss per share was 15 cents, narrower than the Zacks Consensus Estimate of a loss of 36 cents.
U.S. Silica generated revenues of $176.5 million, down 51.2% year over year. The figure also trailed the Zacks Consensus Estimate of $185.1 million.

In the Oil & Gas segment, U.S. Silica witnesses 15% sequential rise in sand volumes. Also, its Sandbox delivered loads surged 74% driven by higher industry frac activity and well completions activities.

U.S. Silica Holdings, Inc. Price, Consensus and EPS Surprise

U.S. Silica Holdings, Inc. Price, Consensus and EPS Surprise
U.S. Silica Holdings, Inc. Price, Consensus and EPS Surprise

U.S. Silica Holdings, Inc. price-consensus-eps-surprise-chart | U.S. Silica Holdings, Inc. Quote

Segment Highlights

Revenues in the Oil & Gas division amounted to $66.3 million, down 73% year over year. Overall sales volume rose 15% sequentially and fell 67% year over year to 1.282 million tons. Oil & Gas contribution margin rose 20% sequentially and fell 38% year over year to $31.5 million or $24.55 per ton.

Revenues in the Industrial and Specialty Products division amounted to $110.1 million in the quarter, down 8% year over year. Overall sales volume rose 21% sequentially and remained flat year over year at 0.957 million tons. The segment’s contribution margin was $42.4 million or $44.26 per ton in the quarter, up 21% sequentially and down 5% year over year.

Financials

At the end of the third quarter, the company’s cash and cash equivalents were $134.9 million, down 27.9% year over year. Long-term debt was $1,209 million, down 0.7% year over year.

Outlook

In the Oil & Gas segment, U.S. Silica predicts sales volumes for the fourth quarter to rise 20-30% sequentially on the back of an expected increase in completion activities. Moreover, the company expects contribution margin from the unit to rise 5-10% sequentially.

In the Industrial & Specialty Products segment, the company expects volumes to fall 5-10% sequentially due to usual business seasonality. Contribution margin of the unit is expected to decline around 10%, which excludes third-quarter benefits from the re-measurement of railcar leases.

Price Performance

Shares of U.S. Silica have plunged 50.4% in the past year against the industry’s 11.2% growth.

Zacks Rank & Other Key Picks

U.S. Silica currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Barrick Gold Corporation GOLD and B2Gold Corp BTG. While Agnico Eagle sports a Zacks Rank #1 (Strong Buy), Barrick and B2Gold carry Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has an expected earnings growth rate of 100% for 2020. Its shares have returned 33% in the past year.

Barrick has an expected earnings growth rate of 100% for 2020. The company’s shares have surged 60.9% in the past year.

B2Gold has an expected earnings growth rate of 250% for 2020. The company’s shares have gained 87.1% in the past year.

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