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Reasons Why Hold Strategy is Apt for RPC (RES) Stock Now
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RPC, Inc. (RES - Free Report) is well poised to grow on the back of strong domestic footprint. The Atlanta, GA-based oilfield service provider has a market capitalization of $838.8 million. It supplies equipment and services to upstream energy companies in almost all prospective plays like the Rocky Mountain regions, Appalachian area, Gulf of Mexico and other resources in the United States. However, intensified competition in the market and conservative upstream spending are persistent concerns for RPC.
In the past three months, the stock has jumped 55.8%, outperforming the 32.8% rise of the industry it belongs to. It beat earnings estimates in the past four quarters, with an average surprise of 24.1%.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth holding on to at the moment.
What’s Favoring the Stock?
RPC is among the leading providers of advanced oilfield services, and equipment to almost all prospective oil and gas shale plays in the United States. It also provides services in some selected markets around the globe. The company derives strong and stable revenues via diverse oilfield services that include pressure pumping, coiled tubing and rental tools.
With no debt load, the company had cash and cash equivalents of $145.6 million at third quarter-end. This reflects its strong balance sheet that will provide the company with massive financial flexibility. It allows RPC to remain afloat during tough times. Markedly, its frac assets have been upgraded to have dual fuel capabilities. This can enable the company to boost utilization during the period of improving activities.
RPC’s management has taken strategic measures to pull through the challenging exploration and production spending environment. As such, it has heavily slashed capital budget. This is indicative of the company’s capital efficiency. Importantly, management is focused on maintaining a healthy capital structure, while looking to improve shareholder returns.
For more than a decade, RPC has been reporting positive operating cash flows, reflecting stable operations despite volatile commodity prices. Moreover, the recent oil price recovery and slow recovery in rig counts can increase the company’s operations in the coming days. The oil and gas drillers in the United States have added rigs for seven successive weeks now.
Downsides
However, there are a few factors that are impeding the growth of the stock lately.
Intensified competition in the domestic market has left limited room for oilfield services companies to charge premium prices for the services being offered. Moreover, last year, slowdown of demand for pressure pumping services in shale plays marred RPC’s prospects. As pressure pumping is RPC’s biggest service line, the firm is under pressure.
Explorers and producers are not getting enough incentive to produce crude volumes in a massive scale as the coronavirus pandemic is still affecting economies. The drop in crude production growth might keep demand for oilfield services low.
Upstream companies are constrained by reduction in borrowing capacity and an increase in the cost of capital. Also, explorers are facing constant pressure from investors for higher returns instead of production growth. These headwinds are keeping investments from explorers and producers in the land market of North America low. Hence, conservative spending by customers is likely to hurt demand for the company’s services.
To Sum Up
Despite significant growth opportunities, intensified competition in the domestic market and conservative spending by customers are concerns. Nevertheless, we believe that systematic and strategic plan of action will drive its long-term growth.
TC PipeLines’ bottom-line estimates for 2021 have increased nearly 2% in the past 60 days.
Suncor’s sales for 2021 are expected to increase 16.5% year over year.
Summit Midstream’s bottom-line estimates for 2021 have increased 12.4% in the past 60 days.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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Reasons Why Hold Strategy is Apt for RPC (RES) Stock Now
RPC, Inc. (RES - Free Report) is well poised to grow on the back of strong domestic footprint. The Atlanta, GA-based oilfield service provider has a market capitalization of $838.8 million. It supplies equipment and services to upstream energy companies in almost all prospective plays like the Rocky Mountain regions, Appalachian area, Gulf of Mexico and other resources in the United States. However, intensified competition in the market and conservative upstream spending are persistent concerns for RPC.
In the past three months, the stock has jumped 55.8%, outperforming the 32.8% rise of the industry it belongs to. It beat earnings estimates in the past four quarters, with an average surprise of 24.1%.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth holding on to at the moment.
What’s Favoring the Stock?
RPC is among the leading providers of advanced oilfield services, and equipment to almost all prospective oil and gas shale plays in the United States. It also provides services in some selected markets around the globe. The company derives strong and stable revenues via diverse oilfield services that include pressure pumping, coiled tubing and rental tools.
With no debt load, the company had cash and cash equivalents of $145.6 million at third quarter-end. This reflects its strong balance sheet that will provide the company with massive financial flexibility. It allows RPC to remain afloat during tough times. Markedly, its frac assets have been upgraded to have dual fuel capabilities. This can enable the company to boost utilization during the period of improving activities.
RPC’s management has taken strategic measures to pull through the challenging exploration and production spending environment. As such, it has heavily slashed capital budget. This is indicative of the company’s capital efficiency. Importantly, management is focused on maintaining a healthy capital structure, while looking to improve shareholder returns.
For more than a decade, RPC has been reporting positive operating cash flows, reflecting stable operations despite volatile commodity prices. Moreover, the recent oil price recovery and slow recovery in rig counts can increase the company’s operations in the coming days. The oil and gas drillers in the United States have added rigs for seven successive weeks now.
Downsides
However, there are a few factors that are impeding the growth of the stock lately.
Intensified competition in the domestic market has left limited room for oilfield services companies to charge premium prices for the services being offered. Moreover, last year, slowdown of demand for pressure pumping services in shale plays marred RPC’s prospects. As pressure pumping is RPC’s biggest service line, the firm is under pressure.
Explorers and producers are not getting enough incentive to produce crude volumes in a massive scale as the coronavirus pandemic is still affecting economies. The drop in crude production growth might keep demand for oilfield services low.
Upstream companies are constrained by reduction in borrowing capacity and an increase in the cost of capital. Also, explorers are facing constant pressure from investors for higher returns instead of production growth. These headwinds are keeping investments from explorers and producers in the land market of North America low. Hence, conservative spending by customers is likely to hurt demand for the company’s services.
To Sum Up
Despite significant growth opportunities, intensified competition in the domestic market and conservative spending by customers are concerns. Nevertheless, we believe that systematic and strategic plan of action will drive its long-term growth.
Stocks to Consider
Some better-ranked players in the energy space include TC PipeLines, LP , Suncor Energy Inc. (SU - Free Report) and Summit Midstream Partners, LP (SMLP - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TC PipeLines’ bottom-line estimates for 2021 have increased nearly 2% in the past 60 days.
Suncor’s sales for 2021 are expected to increase 16.5% year over year.
Summit Midstream’s bottom-line estimates for 2021 have increased 12.4% in the past 60 days.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>