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Why Is Hi-Crush Partners LP (HCR) Down 32.7% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Hi-Crush Partners LP (HCR). Shares have lost about 32.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hi-Crush Partners LP 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.

Hi-Crush Surpasses Q2 Earnings and Revenue Estimates

Hi-Crush posted net loss of $117.5 million or $1.16 cents per share in second-quarter 2019, against net income of nearly $67 million or 67 cents in the year-ago quarter.

Barring one-time items, adjusted loss per share of 2 cents was narrower than the Zacks Consensus Estimate of a loss of 5 cents.

Revenues tumbled 28.4% year over year to $178 million. The figure, however, beat the Zacks Consensus Estimate of $170.1 million.

Total frac sand sold during the quarter was 2,662,086 tons, down 12.4% year over year. Total sales from frac sand rose 9% sequentially to $125.9 million in the second quarter.

Contribution margin per ton sold slumped 55.4% year over year to $13.80 but rose 13.2% sequentially in the second quarter. Average sales price was $47 per ton, modestly down from $48 per ton in the first quarter.

Operational Update

Post the acquisitions of Pronghorn Logistics, the PropDispatch software and FB Industries as well as their integration in the PropStream business, Hi-Crush consolidated its wellsite and logistics operations under the name Pronghorn Energy Services. The equipment business that supports Pronghorn Energy Services will lease and sell equipment to third parties under the name NexStage Equipment Systems. However, sand production and sales will be handled under the name ‘Hi-Crush Inc’.

The branding of equipment sales and leasing under the name NexStage Equipment Systems indicates the company’s effort toward development of differentiated set of equipment solutions.

Financial Position

At the end of the second quarter, the company had $52.8 million in cash and $59.2 million in available capacity under the revolving credit facility.

In June 2019, Hi-Crush's board of directors approved a stock repurchase program of up to $25 million, which is effective on that date and authorized through June 2020.

As of Jun 30, 2019, Hi-Crush has repurchased 1,177,731 common shares for a total cost of $3.2 million.

Outlook

Hi-Crush projects total sales volumes in the range of 2.4-2.7 million tons for third-quarter 2019. It expects continued deployment of last mile systems in the second half of 2019.

Per management, the potential for E&P budget exhaustion in the latter half of 2019 may lead to modest reduction in activity levels late in the third quarter. The company has undertaken steps to lower cost structure and leverage operational flexibility to respond to changes in operating environment and maintaining focus on customer service as well as safety.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -1025% due to these changes.

VGM Scores

Currently, Hi-Crush Partners LP has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hi-Crush Partners LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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