Layne Christensen Company

Layne Christensen Company (LAYN - Snapshot Report) has seen its stock fall in the market sell-off despite posting record revenues that grew 23.8% in the second quarter. LAYN has surprised on earnings 3 out of the last 4 quarters on average by 19.18%. Layne has a forward P/E of 8.05.

Company Description

Layne Christensen, a Zacks #1 Rank (strong buy), provides drilling services in four markets: water resources, mineral exploration, geoconstruction and energy services and production.

Its customers include a large cross section of industries from municipalities, industrial companies, miners, oil and gas companies and consulting firms. The company operates in the U.S., Canada, Mexico, Australia, Africa and South America.

Layne has several different revenue streams, including Layne Energy, an exploration and production company with over 400 wells in the Mid-Continent Cherokee Basin.

Its Water Resource Division provides water related services including hydrological studies, well design, drilling and pump installation. The segment constructs water treatment facilities and sells products that treat contaminants such as nitrates, arsenic, and radon in groundwater.

The Mineral Exploration Division provides aboveground and underground drilling activities for miners.

The GeoConstruction Division specializes in ground modification and specialized structural support to the heavy civil construction sector. This division works on major construction projects such as dams, tunnels, and shafts. It works to improve weak and unstable soils and groundwater control during excavation.

Second Quarter 2009 Revenues Jump 23.8%

On Aug 28, Layne Christensen reported second-quarter fiscal 2009 earnings that blew by Wall Street estimates by 25.81%. Net income rose 58% to $15.09 million, or 78 cents per share, from $9.57 million, or 60 cents. Analysts expected 62 cents.

Revenues grew 23.8% to a record $269.6 million from $217.8 million in the year ago period. All 4 divisions saw double digit revenue growth. Revenues in the Water Resources Division rose 22%. The backlog for the water infrastructure division also jumped to $477.6 million as of July 31, 2008 compared to $364.2 million at the end of the second quarter of 2007.

The Mineral Exploration Division grew 28.4% mainly due to high gold and base metal prices. The Energy Division gained 28.6% from increased production and higher gas pricing.

While it was an outstanding quarter and continued the company's streak of 18 consecutive quarters with year-over-year quarterly improvements, Layne is aware the future may look different.

"Overall, the economy has been getting increasingly difficult and presents a continuing challenge for the Company going forward," said Andrew Schmitt, President and CEO.

Consensus Estimates Rise for Third Quarter 2009 and the Full Year

Covering analysts responded to the second quarter earnings surprise by raising estimates for the third quarter and the full year. Third-quarter estimates are up a penny to 68 cents in the last 30 days. Full year 2009 estimates are up 4 cents to $2.61 per share.

Value Fundamentals

Layne Christensen's stock has been pummeled in the market sell-off and is now cheap. It trades with a forward P/E of 8.05. Its price-to-book is only 0.94. It has a 5-year average return on equity (ROE) of 10.43%.