It has been about a month since the last earnings report for Helmerich & Payne (HP). Shares have lost about 14.8% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Helmerich & Payne Q1 Earnings & Revenues Surpass Estimates
Helmerich & Payne Inc. recently released first-quarter fiscal 2020 results wherein it delivered a comprehensive earnings beat on the back of higher offshore rig margin and increase in revenues from the H&P Technologies segment.
The company posted adjusted quarterly earnings of 13 cents a share, surpassing the Zacks Consensus Estimate of 7 cents. However, the bottom line plunged 59.37% from the year-ago figure of 32 cents. This underperformance can be attributed to weak contributions from the U.S. Land segment.
Operating revenues of $614.66 million topped the Zacks Consensus Estimate of $603.16 million. However, the top line decreased 17% from the year-ago level of $740.60 million.
U.S. Land: During the quarter, operating revenues of $508.8 million were down 17.85% year over year as revenue days declined 19.37% to 17,684.
Rig utilization dropped 64% from the prior-year’s 68%. The segment’s operating profit came in at $56.7 million compared with the year-earlier profit of $75.7 million. However, the average rig margin per day rose 8% from the prior-year quarter to $10,418. Moreover, rig revenue per day improved in the quarter under review.
Offshore: Revenues came in at $40.25 million, up 9.06% from the year-ago quarter’s $36.9 million. While rig utilization and revenue days rose from the year-ago level, higher average rig expenses per day and increased direct operating expenses diminished the segment’s operating profits by 12.5% to $6.3 million from $7.2 million in the prior-year quarter.
Although daily average rig revenues increased 23.02% from the year-ago figure, rig expense per day climbed 19.36%. Moreover, the average rig margin per day surged 32.39% year over year to $13,237, beating the Zacks Consensus Estimate of $12,230.
International Land: Operations generated revenues of $46.5 million, down from $66.3 million in the prior-year quarter on lower average rig revenue per day.
Moreover, rig utilization decreased to 57% while average rig revenue and rig margin per day decreased 22.09% and 44% each from the year-ago quarter to $27,714 and $7,208, respectively. The segment’s bottom line resulted in an operating income of $3.11 million, lower than $6.63 million a year ago.
H&P Technologies: In late 2018, Helmerich & Payne had announced the creation of its new segment ‘H&P Technologies’ to highlight the addition of the then-acquired rig technology companies to its portfolio, namely MagVar and Motive Drilling along with Angus Jamieson Consulting, an industry leader in wellbore positioning.
Courtesy of surging demand during the reported quarter, the segment recognized revenues worth $18.5 million, up 25.9% from the year-ago figure. Higher revenues partly offset the company’s increasing direct operating expenses and depreciation, leading to the segment’s narrower operating loss of $4.5 million from the year-ago loss of $6.4 million.
Capital Expenditure & Balance Sheet
In the reported quarter, Helmerich & Payne spent $46.02 million on capital programs. As of Dec 31, 2019, the company had $355.01 million in cash and cash equivalents while long-term debt was $479.3 million (debt-to-capitalization ratio of 10.8%).
This Tulsa, OK-based company expects activity in the U.S. land segment to remain flat to up 1.5% sequentially for second-quarter fiscal 2020. While average rig revenue per day is projected in the band of $25,000-$25,500, daily average rig cost is anticipated within $14,650-$15,150.
Coming to the offshore segment, Helmerich & Payne envisions average rig margin per day within $10,000-$11,000 for the fiscal second quarter and revenue days to plunge 30% sequentially.
Additionally, international land segment revenue days are assumed to witness a 7% decrease sequentially. Average rig margin per day is forecast to decline to $6,000-$7,000.
Revenues from HP Technologies are predicted in the $16-$19 million range.
For the current fiscal year, Helmerich & Payne estimates capital outlay within $275-$300 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 48.21% due to these changes.
At this time, Helmerich & Payne has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. 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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