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Why Is USA Compression (USAC) Up 3.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for USA Compression Partners (USAC - Free Report) . Shares have added about 3.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is USA Compression due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

USA Compression Posts Third Quarter Loss, Sales Up

USA Compression reported a a third-quarter 2022 net loss of 3 cents per common unit, lagging the Zacks Consensus Estimate of a profit of 2 cents due to higher total costs and other expenses.

However, the loss was narrower than the year-ago quarter’s loss of 8 cents per share. This favorable comparison was due to the partnership posting a net income of $9.6 million in the third quarter of 2022 compared with the net income of $4.1 million for the same period last year.

Revenues of $179.6 million were approximately 13.23% higher than the year-ago quarter’s reading of $158.6 million.
Adjusted EBITDA increased about 9.6% to approximately $109.2 million from last year’s third-quarter figure of $99.6 million. Moreover, the partnership’s distributable cash flow rose from $51.9 million in the prior-year quarter to $55.2 million.

The firm reported operating cash flow of $49.2 million in the quarter, up from the $45.3 million generated in the prior-year quarter. However, its gross operating margin of 66.9% declined from the year-ago period’s 69%.

In the third quarter, USA Compression Partners’ revenue-generating horsepower capacity increased by about 6% to 3,090,910 horsepower from the level recorded in the corresponding period of last year.  Average monthly revenues per horsepower were $17.53, higher than the year-ago quarter’s figure of $16.62.

USAC’s average quarterly horsepower utilization rate came in at 90.3%, higher than 82.3% in the year-ago period.

DCF, Capex & Balance Sheet

USA Compression Partners’ distributable cash flow available to limited partners for the third quarter equaled $55.2 million (providing 1.07X distribution coverage), up 6.2% from the year-ago level.

On Oct 13, the firm announced a third-quarter cash distribution of 52.50 cents per unit ($2.10 on an annualized basis). The distribution was paid out on Nov 4, 2022 to common unitholders of record as of Oct 24, 2022.

It spent $46.7 million as growth capex. The partnership’s maintenance capex amounted to $8.1 million.

As of September 2022, USA Compression Partners had about $2.08 billion of net long-term debt.

Guidance

For 2022, USAC updated its distributable cash flow guidance from the earlier $213-$233 million range to the $215-$225 million range. The partnership also updated the adjusted EBITDA outlook from the $406-$426 million range to the $420 -$430 million band.

Additionally, the company now expects 2022 net income in the range of $30-$40 million from the previous $33 million-$53 million guidance range.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 20% due to these changes.

VGM Scores

Currently, USA Compression has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, USA Compression has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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