Why Is Patterson-UTI (PTEN) Down 9.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Patterson-UTI (PTEN). Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Patterson-UTI 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 drivers.
Patterson-UTI Q2 Earnings In Line, Sales Miss
Patterson-UTI Energy reported a second-quarter 2023 adjusted net profit of 44 cents per share, which was in line with the Zacks Consensus Estimate. The figure improved from the year-ago quarter's level of 5 cents per share. This outperformance can be attributed to impressive performance from the Contract Drilling Segment.
Total revenues of $758.9 million missed the Zacks Consensus Estimate of $780 million. This can be attributed to lower-than-expected performances of PTEN’s Pressure Pumping, Directional Drilling and Other Operations segments. However, the top line improved 22% on a year-over-year basis.
Patterson-UTI will pay its quarterly dividend of 8 cents per share on Sep 21, 2023, to shareholders of record as of Sep 7, 2023. Moreover, the company repurchased 1.8 million shares during the second quarter, bringing the program's total share repurchase amount through the first half of 2023 to 7.4 million. PTEN distributed about $126 million in cash to shareholders through the first half of 2023, including $33.5 million in dividends. Its share repurchase authorization had $281 million left as of Jun 30, 2023.
Segmental Performances
Contract Drilling: Revenues totaled $432.4 million, up 42% from the prior-year quarter’s figure of $304.6 million. The figure beat our projection of $422.2 million. This was due to the continued renewal of drilling rig contracts. Operating profit amounted to $113.3 million compared with $21.7 million in the second quarter of 2022. The figure also beat our estimate of $108.5 million.
Pressure Pumping: Revenues of $250.2 million rose about 4.9% from the year-ago quarter’s figure of $238.4 million due to better pricing. The figure missed our projection of $276.9 million.
Operating profit totaled $25.3 million compared with $20.1 million in the second quarter of 2022 due to better pricing. The figure missed our estimate of $36.5 million.
Directional Drilling: Revenues totaled $55.1 million, up 0.5% from the prior-year quarter’s figure of $54.8 million but missed our projection of $57.3 million.
Operating profit amounted to $1.3 million compared with $4 million in the corresponding quarter of 2022. The figure missed our estimate of $3.5 million. The underperformance can be attributed to lower activity levels.
Other Operations: Revenues amounted to $21.1 million, 13.9% lower than the year-ago quarter’s figure of $24.5 million. The figure also missed our projection of $23.5 million. The unit also reported a loss of $2 million against a profit of $3.3 per share in the year-ago quarter. The figure missed our estimate of a profit of $1.2 million.
Capital Expenditure & Financial Position
In the reported quarter, PTEN spent $132.394 million on capital programs compared with $96.370 million in the prior-year period. As of Jun 30, 2023, the company had cash and cash equivalents worth $150,288 million and long-term debt of $822,408 million.
Outlook
Patterson-UTI expects rig count and frac activity to improve later in the year and in 2024, driven by strong oil and natural gas prices. PTEN expects capital expenditures of $485 million in the second half of 2023, with $280 million going toward contract drilling, $140 million toward pressure pumping, $20 million toward directional drilling, and $45 million toward other businesses and general corporate needs. The company projects an average of 71 rigs to operate under term contracts during the third quarter of 2023 and an average of 44 rigs to operate under term contracts over the four quarters ending Jun 30, 2024. Patterson-UTI anticipates pressure pumping revenues of approximately $230 million for the third quarter, with an adjusted gross margin of $37 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -21.69% due to these changes.
VGM Scores
Currently, Patterson-UTI has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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. It's no surprise Patterson-UTI has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Patterson-UTI Energy, Inc. (PTEN) : Free Stock Analysis Report
