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A month has gone by since the last earnings report for Helmerich & Payne, Inc. HP. Shares have lost about 2.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is HP due for a breakout? 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 catalysts.
Second-Quarter Fiscal 2018 Results
Helmerich & Payne reported second-quarter fiscal 2018 adjusted operating loss of 5 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line compared favorably with the year-ago adjusted loss of 47 cents. The outperformance was primarily driven by higher drilling activity at its biggest segment — U.S. Land.
Revenues of $577.5 million topped the Zacks Consensus Estimate of $562 million. Further, the top line witnessed an increase of more than 42.5% from the year-ago figure of $405.3 million.
U.S. Land: During the quarter, operating revenues totaled $482.7 million (83.6% of total revenues), up 45.9% year over year. While average rig revenue per operating day was $22,928, — 1.2% above the year-ago period — average rig margin per day was up 25.6% to $8,842. Moreover, utilization levels of 59% in the quarter under review (versus 42% in second-quarter fiscal 2017) resulted in an operating income of 27.1 million at the segment, marking a turnaround from the year-ago loss of $51.9 million.
Offshore: Helmerich & Payne’s Offshore revenues came in at around $33 million, compared with $36.2 million in the prior-year quarter. Daily average rig revenues fell 6.7% to $33,583 and average rig margin per day fell 12.1% to $9,504. Owing to this, the segment’s operating income decreased 7.8% to $5.5 million. Moreover, rig utilization was down from the year-ago level of 77% to 63%.
International Land: Helmerich & Payne’s International Land operations generated revenues of $52.5 million, up from $34.8 million in the prior-year quarter. Average daily rig revenues were $32,796, down 12.2% from the corresponding period of last year and rig margin per day was $8,533, up from the year-ago figure of $3,691.
Additionally, average rig expense per day decreased 27.9% year over year, while activity levels increased to 45% from 25% a year ago. As a result, the segment’s operating loss narrowed to $695 thousand from the year-ago loss of around $11 million.
Capital Expenditure & Balance Sheet
During the quarter, Helmerich & Payne spent approximately $99.5 million on capital programs. As of Mar 31, 2018, the company had approximately $334.8 million in cash, while long-term debt stood at $493.4 million (debt-to-capitalization ratio of 9.9%).
The Tulsa, OK-based company expects activity in the U.S. land segment to rise 7% sequentially during the third quarter of fiscal 2018. While average rig revenue per day is likely to be around $23,000, daily average rig cost is expected to be roughly $14,400 during the quarter.
As of the offshore segment, Helmerich & Payne expects average rig margin per day to be around $10,500 during third-quarter fiscal 2018 and revenue days to increase 15% sequentially.
The international land segment will likely witness a 5-10% sequential increase in revenue days during the quarter, while average rig margin per day is expected to be around $9,000.
For fiscal 2018, Helmerich & Payne projects a capital budget in the range of $400-$450 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to three lower.
Helmerich & Payne, Inc. Price and Consensus
Helmerich & Payne, Inc. Price and Consensus | Helmerich & Payne, Inc. Quote
At this time, HP has an average Growth Score of C. However, its Momentum is doing a lot better with an A. The stock was allocated a grade of B on the value side, putting it in the top 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.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, HP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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