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USA Compression (USAC) Up 3.9% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for USA Compression Partners (USAC). Shares have added about 3.9% in that time frame, outperforming the S&P 500.

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

USA Compression’s Q1 Loss Narrower Than Expected

USA Compression Partnersreported first-quarter 2021 net loss per common unit of 12 cents, narrower than the Zacks Consensus Estimate of a loss of 14 cents attributable to lower costs and expenses.

However, the year-ago quarter reported earnings of 4 cents. The unfavorable comparisons were due to lower-than-expected revenue-generating horsepower capacity, which, at 2,994,418 horsepower, fell short of the Zacks Consensus Estimate of 3,036,000 horsepower.

Revenues of $158 million were 11.7% below the year-ago quarter and missed the Zacks Consensus Estimate of $161 million.

Adjusted EBITDA was down 6.24% to $99.6 million. Moreover, the partnership’s distributable cash flow fell from $54.7 million in the prior-year quarter to $52.6 million.

The partnership reported operating cash flow of $39.6 million in the quarter. This marked an decrease from $50.07 million that it had generated in the prior-year quarter. Also, gross operating margin, at 69.1%, marked an improvement over the year-ago period’s 66.9%.

In the first quarter, the partnership’s revenue-generating horsepower capacity decreased 9.8% from last year’s corresponding period to 2,994,418 horsepower.  Further, the average monthly revenue per horsepower fell to $16.60 from $16.89 in the first quarter of 2020. Meanwhile, USA Compression Partners’ average quarterly horsepower utilization rate came in at 83.1%, down from 92.5% in the year-ago period.

DCF, Capex & Balance Sheet

USA Compression Partners reported that its DCF available to limited partners for the first quarter totaled $52.6 million (providing 1.03X distribution coverage), down 3.9% from the year-ago level. Notably, on Apr 14, the partnership announced first-quarter cash distribution of 52.50 cents per unit ($2.10 on an annualized basis).

USA Compression Partners spent $4.2 million on growth capex. The partnership’s maintenance capex consisted of $4.5 million.

As of Mar 31, 2021, the partnership had $1.96 billion in net long-term debt. Net debt-to-capitalization was approximately 87.6%.

Guidance

For 2021, USA Compression Partners projects full-year DCF between $193 million and $213 million. Meanwhile, it sees adjusted EBITDA of $385-$405 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, USA Compression has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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 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 downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise USA Compression has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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