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Why Is Helmerich & Payne (HP) Down 13.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Helmerich & Payne (HP). Shares have lost about 13.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Helmerich & Payne 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 catalysts.

Helmerich & Payne Q3 Loss In Line, Revenues Beat Estimates

Helmerich & Payne reported an adjusted loss of 57 cents per share for the fiscal third quarter, meeting the Zacks Consensus Estimate.

However, this oil and gas contract drilling services provider’s loss worsened from the year-ago quarter’s loss of 34 cents.

The bottom-line result for the reported quarter can be attributed to a strong operating profit from the offshore Gulf of Mexico segment, offset by higher operating expenses and a weak revenue contribution from the International Solutions segment.

Nevertheless, operating revenues of $332.21 million topped the Zacks Consensus Estimate of $323 million and also increased 4.8% from the year-ago level.

Segmental Performance

North America Solutions: Operating revenues of $281.1 million were up10.5% year over year. However, the segment reported a wider operating loss of $43.7 million than the loss of $25.2 million reported in third-quarter fiscal 2020 due to costs related to reactivating rigs.

Offshore Gulf of Mexico: Revenues of $33.4 million decreased 11.01% from the year-ago quarter’s reading. The segment recorded an operating profit of $5.71 million, higher than the year-ago quarter’s $3.01 million.

International Solutions: Operations generated revenues of $15.3 million, down from $22.5 million in the prior-year quarter. The unit reported a loss of $3.54 million, narrower than the year-ago loss of $9.54 million.

Capital Expenditure & Balance Sheet

In the reported quarter, Helmerich & Payne spent $18.43 million on capital programs. As of Jun 30, 2021, the company had $370.6 million in cash and cash equivalents while long-term debt was $481 million (debt-to-capitalization of 13.8%).

Guidance

This Tulsa, OK-based company anticipates operating gross margins between $72 million and $82 million in the North America Solutions segment for the fiscal fourth quarter. The company predicts around 127-132 contracted rigs by Sep 30, 2021.  

Coming to the Offshore Gulf of Mexico segment, Helmerich & Payne envisions operating gross margins within $7-$9 million for the fiscal fourth quarter.

International Solutions’ operating gross margins are forecast at a loss of $2-$0 million for the current quarter.

For the current fiscal year, Helmerich & Payne estimates a capital outlay at the lower end of the past projection of $85-$105 million.

Research and development expenses for fiscal 2021 are now expected to be roughly $20-$25 million while general and administrative expenses are projected to be approximately $160 million. Depreciation is estimated to be around $425 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -7.14% due to these changes.

VGM Scores

At this time, Helmerich & Payne has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 D. 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 these revisions indicates a downward shift. Notably, Helmerich & Payne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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