A month has gone by since the last earnings report for Dril-Quip (DRQ). Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Dril-Quip due for a breakout? 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.
Dril-Quip Q2 Earnings Miss Estimates, Revenues Beat
Dril-Quipreported second-quarter 2020 adjusted loss per share of 34 cents, wider than the Zacks Consensus Estimate of a loss of 11 cents. In the year-ago comparable period, the company reported earnings of 3 cents per share.
It registered total revenues of $90 million in the quarter, lower than $104 million in the year-ago period. However, the figure beat the Zacks Consensus Estimate of $82 million.
The weak quarterly earnings were due to coronavirus-dented demand for the company’s highly-engineered drilling and production equipment.
Dril-Quip reported product bookings of $40.5 million in the quarter. The coronavirus pandemic has dented global energy demand and weakened commodity pricing scenario. This led upstream energy players, the company’s customers, to lower capital spending, leading to a substantial year-over-year decline in product booking.
Notably, the company recorded second-quarter operating loss of $7.5 million against a profit of $2.1 million in the prior-year quarter.
Total Costs and Expenses
On the cost front, cost of sales declined to $66.9 million in the reported quarter from $73.9 million in the year-ago period. Engineering and product development costs, however, rose to $5.4 million in the quarter from the year-ago $5.2 million. Total cost and expenses during the quarter totaled $97.9 million compared with $101.7 million a year ago.
Free Cash Flow
Dril-Quip’s free cash flow in the second quarter was a negative $1.1 million. In the second quarter of 2019, the company’s free cashflow was recorded at $8.7 million.
At the end of the second quarter, the company had $238 million in backlog, down from $273 million as of Dec 31, 2019. Of the existing backlog, 80% will likely be converted to revenues this year, while the rest will be converted next year.
Dril-Quip recorded $4.1 million capital expenditure in the quarter, higher than the year-ago level of $1.1 million.
As of Jun 30, 2020, its cash balance was $345.8. It had total available liquidity of $383.8 million. The company’s balance sheet is free of debt load, which highlights its sound financial position.
For 2020, the leading manufacturer of highly engineered drilling and production equipment expects product booking worth $200 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 49.28% due to these changes.
At this time, Dril-Quip has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Dril-Quip has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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DrilQuip, Inc. (DRQ) : Free Stock Analysis Report
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