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USA Compression (USAC) Incurs Wider-Than-Expected Loss in Q2

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Zacks Equity Research
·3 min read
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USA Compression Partners, LP USAC reported second-quarter 2020 adjusted net loss per unit of 6 cents, wider than the Zacks Consensus Estimate of a loss of 4 cents. The bottom line also compared unfavorably with the year-ago adjusted profit of a penny. The underperformance reflected lower utilization.

Revenues of $168.7 million were 2.9% lower than the year-ago quarter. However, the figure was in line with the Zacks Consensus Estimate due to higher-than-expected revenue-generating horsepower capacity, which, at 3,191,348 horsepower, surpassed the Zacks Consensus Estimate of 3,188,000 horsepower.

Adjusted EBITDA inched up 0.7% year over year to $105.5 million on cost-cutting initiatives. The partnership’s distributable cash flow rose from $54.1 million in the prior-year quarter to $58.7 million.

The partnership reported operating cash flow of $97.4 million in the quarter. This marked a slight decline from the $99.8 million that it had generated in the prior-year quarter. But gross operating margin, at 70.4%, was an improvement over the year-ago period’s 67.6%.

In the second quarter, the partnership’s revenue-generating horsepower capacity decreased 2.4% from last year’s corresponding period to 3,191,348 horsepower.  Meanwhile, the average monthly revenue per horsepower rose to $16.79 from $16.60 in the second quarter of 2019. However, USA Compression Partners’ average quarterly horsepower utilization rate came in at 88%, down from 94.6% in the year-ago period.

USA Compression Partners, LP Price, Consensus and EPS Surprise

USA Compression Partners, LP Price, Consensus and EPS Surprise
USA Compression Partners, LP Price, Consensus and EPS Surprise

USA Compression Partners, LP price-consensus-eps-surprise-chart | USA Compression Partners, LP Quote

DCF, Capex & Balance Sheet

USA Compression Partners reported that its distributable cash flow (“DCF”) available to limited partners for the second quarter totaled $58.7 million (providing 1.15X distribution coverage), up 8.6% from the year-ago level. Notably, on Jul 21, the partnership announced second-quarter cash distribution of 52.50 cents per unit ($2.10 on an annualized basis).

USA Compression Partners spent $22.8 million on growth capex, while its maintenance capex consisted of $4.4 million.

As of Jun 30, 2020, the partnership had $1.9 billion in net long-term debt. Net debt-to-capitalization was approximately 80.6%.

Guidance

USA Compression Partners reiterated its growth capital spending guidance of $80-$90 million for 2020. The partnership is still projecting full-year DCF between $195 million and $215 million, while it sees adjusted EBITDA of $395-$415 million.

Zacks Rank & Key Picks

USA Compression Partners carries a Zacks Rank #4 (Sell).

Investors interested in the energy space could look at some better options like Murphy USA Inc. MUSA, Core Laboratories N.V CLB and Royal Dutch Shell plc RDS.A. Murphy USA sports a Zacks Rank #1 (Strong Buy), while Core Laboratories and Royal Dutch Shell carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The 2020 Zacks Consensus Estimate for Murphy USA indicates 134.2% earnings per share growth over 2019.

Over 30 days, Core Laboratories has seen the Zacks Consensus Estimate for 2020 increase 17.1%.

Over 30 days, the Hague, Netherlands-based Shell has seen the Zacks Consensus Estimate for 2020 surge 141.9%.

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