Why Is RPC (RES) Down 11.7% Since Last Earnings Report?
It has been about a month since the last earnings report for RPC (RES). Shares have lost about 11.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RPC 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.
RPC Q3 Earnings Lag Estimates, Revenues Fall Y/Y
RPC Inc. reported third-quarter adjusted earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 24 cents. The bottom line also declined from the year-ago quarter’s level of 32 cents.
Total quarterly revenues declined to $330 million from $460 million recorded in the prior-year quarter. The top line also missed the Zacks Consensus Estimate of $378 million.
Weak quarterly results can be attributed to a year-over-year decline in average domestic rig count, coupled with lower oil and natural gas prices.
Segmental Performance
Operating profit at the Technical Services segment totaled $18.9 million, lower than the year-ago quarter’s level of $89.5 million. The sharp decline can be attributed to reduced revenues in the primary service line, which is pressure pumping.
Operating profit at the Support Services segment amounted to $6.9 million, higher than the year-ago quarter’s level of $5.3 million. The rise resulted from increased activities and improved pricing.
Total operating profit in the quarter was $22.7 million, down from $92.2 million reported in the year-ago quarter. The average domestic rig count was 649, marking a 14.7% decline from the year-ago quarter’s level. The average oil price in the quarter was $82.17 per barrel, down 11.5% from the year-ago quarter’s level. The average price of natural gas was $2.59 per thousand cubic feet, down 67.8% from that recorded in the corresponding period of 2022.
Costs and Expenses
In third-quarter 2023, the cost of revenues decreased from $309.8 million to $239.1 million. Selling, general and administrative expenses increased to $42 million from the year-ago quarter’s figure of $38.2 million.
Financials
RPC’s total capital expenditure for the September-end quarter of 2023 was $44.3 million.
As of Sep 30, RPC had cash and cash equivalents of $171.9 million, up sequentially from $100.5 million. Nonetheless, the company managed to maintain a debt-free balance sheet.
Outlook
For 2023, the company reiterated its capital expenditure guidance between $200 million and $250 million. The metric indicates an increase from $140 million reported in 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -50% due to these changes.
VGM Scores
Currently, RPC has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, 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 downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise RPC has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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RPC, Inc. (RES) : Free Stock Analysis Report
