Layne Christensen Easily Beats

Layne Christensen Co.’s (LAYN - Snapshot Report) fiscal 2011 first-quarter earnings surged to $6.6 million or 34 cents per share from $1.0 million or 5 cents per share in the year-ago period. The quarterly results also surpassed the Zacks Consensus Estimate of 22 cents per share derived from 6 covering analysts. The performance was primarily driven by strong mineral exploration revenues and higher gross margins.

Layne Christensen is engaged in providing drilling services and related products and services in 4 principal markets: water infrastructure, mineral exploration, geotechnical construction, and oil and gas. The company’s customers include municipalities, industrial, mining, oil and gas companies, and consulting and engineering firms.

Quarterly Details

Layne Christensen’s revenue during the quarter recorded a growth of 13.0% to $230.7 million from $204.2 million in the year-ago quarter. Water Infrastructure segment revenues grew 2.9% year-over-year to $172.9 million, primarily due to additional revenues from acquired operations and specialty drilling, and higher revenues from geoconstruction. However, segment revenues were partially offset by the completion of a large contract last year and persistent weakness in housing construction and municipal government spending.

Mineral Exploration revenues surged 85% year-over-year to $45.9 million, mainly driven by enhanced activity levels across all end markets, particularly in West Africa and Mexico. However, Energy segment declined 7.5% year-over-year to $9.5 million, primarily due to lower prices.

Layne Christensen’s gross profit during the quarter rose 32.8% year-over-year to $58.8 million, while gross margin expanded 380 basis points (bps) to 25.5% due to higher margins on geoconstruction and specialty drilling. Selling, general and administrative (SG&A) expenses rose 5.7% year-over-year to $33.5 million, mainly due to increased incentive compensation. However, higher revenues and gross margin led to an operating income (gross profit less SG&A, and depreciation and amortization) of $11.2 million, compared to an operating loss of $4.9 million in the prior-year quarter.

Layne Christensen ended the quarter with cash and cash equivalents of $67.9 million, compared to $62.7 million in the year-ago period. The company‘s total long-term debt (excluding current maturities) was $6.7 million at quarter-end, compared to $26.7 million at the end of the prior-year quarter.

Zacks Consensus

The Zacks Consensus Estimate on Layne Christensen’s earnings for the fiscal year ending January 2011 has moved up 2 cents over the past month to 97 cents per share as 1 of 6 covering analysts upwardly revised, while 1 moved in the opposite direction. Moreover, the most accurate estimate for the fiscal is currently pegged at $1.03 per share, which indicates a potential upside of 6.2% over the Zacks Consensus Estimate.

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