It has been about a month since the last earnings report for RPC (RES). Shares have added about 1.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is RPC due for a pullback? 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.
RPC Beats Q2 Earnings Estimates on Cost-Containment Efforts
RPC, Inc. reported second-quarter 2020 loss of 10 cents per share, narrower than the Zacks Consensus Estimate of a loss of 13 cents on successful cost-containment efforts. However, the bottom line deteriorated from earnings of 3 cents per share in the year-ago quarter. The weakness can be primarily attributed to lower activity levels in U.S. oilfield drilling and completions.
Total revenues of $89.3 million missed the Zacks Consensus Estimate of $106 million. Moreover, the top line declined from the year-ago figure of $358.5 million. The company’s top line took a hit from vast exposure to the completions market and weak pressure pumping environment.
Operating loss in the Technical Services segment totaled $34.1 million against the year-ago profit of $6.9 million. The underperformance was mainly caused by lower pricing and activity levels.
Operating loss in the Support Services segment came in at $1.8 million, deteriorating from a profit of $4 million in the year-ago quarter due to lower activities.
Total operating loss for the quarter was $37.5 million against the year-ago profit level of $8.4 million. Average domestic rig count was 392 for the second quarter, indicating 60.4% fall from the year-ago level.
Cost and Expenses
Cost of revenues contracted from $265.1 million in second-quarter 2019 to $80 million due to reduced activity levels and cost-reduction initiatives. Moreover, selling, general and administrative expenses fell to $28.8 million for the quarter from the year-ago figure of $43.3 million due to a decline in employment expenses. Also, it incurred impairment and other charges of $1.6 million for the quarter.
RPC’s total capital expenditure for the June quarter of 2020 amounted to $14 million.
As of Jun 30, the company had cash and cash equivalents of $145.4 million, higher than the first-quarter level of $82.6 million, and no long-term debt.
Slowdown in U.S. drilling activities and persistent weakness in crude prices have hurt demand for oilfield services. Although the company expects to witness improvement in the second half of the year, it is uncertain whether the recovery will be sustainable. The improvement is expected to boost the company’s revenues for the third quarter and lead to narrower loss. It now expects 2020 capital expenditure to be $50-$60 million, lower than the original guidance of $80 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, RPC has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, RPC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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