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Why Is ProPetro (PUMP) Down 8.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for ProPetro Holding (PUMP). Shares have lost about 8.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ProPetro 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 drivers.

ProPetro's Q4 Loss Narrower Than Expected

ProPetro Holding reported fourth-quarter adjusted net loss of 13 cents per share, narrower than the Zacks Consensus Estimate’s loss of 20 cents attributable to better-than-expected revenue contribution from thePressure Pumping unit. The segment reported revenues of $151.4 million, beating the Zacks Consensus Estimate of $146 million.

However, the bottom line compared unfavorably with the year-ago quarter’s earnings of 25 cents. The underperformance reflects higher year-over-year impairment expense and lower activity levels, with effective utilization for the period at 9.6 fleets, falling sharply from the year-ago quarter’s 19.2.        

Quarterly revenues of $154 million missed the Zacks Consensus Estimate sales of $155 million and declined more than 64.5% from the year-ago quarter.

The oilfield service provider’s pressure pumping revenues of $151.4 million outpaced the consensus mark of $146 million. However, the same declined 64.5% year over year. Adjusted EBITDA in the fourth quarter amounted to $24 million, down from $110.3 million in the year-ago quarter.

ProPetro’s adjusted EBITDA of $34.67 million for its Pressure Pumping unit in the December quarter beat the Zacks Consensus Estimate of $26.54 million. Investors should know that pressure pumping is the main contributor to the company’s earnings. The upside was the outcome of the company’s effective performance and productive cost management.

Pressure Pumping Division

The Midland, TX-based company provides hydraulic fracturing, cementing and acidizing functions through the Pressure Pumping segment. The business contributed 98.1% to the company's total revenues in the quarter under review. Service revenues plunged 64.4% from the prior-year quarter’s levels to $151.4 million due to significant fall in the number of hydraulic fracturing fleets.

Costs & Expenses

ProPetro reported service cost of $116 million in the fourth quarter, down 62% from the year-ago quarter. General and administrative expenses were $20 million, down 35.7% from $31.1 million in the prior-year quarter.

Balance Sheet & Capital Expenditures

As of Dec 31, ProPetro had cash and cash equivalents worth $68.8 million and did not incur any long-term debt. It also had $52 million under its revolving credit facility. Capital expenditures in the December quarter summed $21 million, down 68.3% from the level in fourth-quarter 2019.

Guidance

With the recovery in commodity prices, ProPetro’s 2021 outlook seems optimistic as the company is well positioned to benefit from growing activity and service pricing in the Permian Basin.

ProPetro projects first-quarter 2021 effective utilization of 9.5-11 fleets, taking into account the recent extreme winter weather events in the Permian Basin.


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, ProPetro has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, ProPetro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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