A month has gone by since the last earnings report for Helmerich & Payne (HP Quick QuoteHP - Free Report) . Shares have lost about 10.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Helmerich & Payne 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.

Helmerich & Payne's Q3 Loss Narrower Than Expected

Helmerich & Payne reported fiscal third-quarter 2020 adjusted loss of 34 cents per share, narrower than the Zacks Consensus Estimate of 67 cents. The outperformance reflects better than expected results from the key North America Solutions segment as lower costs helped prop up average rig margins.

However, the bottom line loss compared unfavorably with the year-ago adjusted earnings of 40 cents due to steep decline in activity.

Operating revenues of $317.4 million topped the Zacks Consensus Estimate of $304 million but decreased 53.9% from the year-ago level.

Segmental Performance

North America Solutions: During the quarter, operating revenues of $254.4 million were down 57.7% year over year as revenue days fell 59.2% to 8,101. Moreover, rig utilization dropped to 32% from the prior-year’s 62%.

However, the average rig margin per day improved 13.1% from the prior-year quarter to $12,563 as daily rig revenue edged up, while rig expense ticked down. The segment’s operating loss came in at $25.2 million, significantly narrower than the year-earlier loss of $147 million. Apart from margin gains, results were helped by the adverse impact of asset impairment charges in the fiscal third quarter of 2019.

Offshore Gulf of Mexico: Revenues of $37.5 million were essentially flat from the year-ago quarter. While revenue days declined 16.7% to 455 and rig utilization fell to 63% from the prior-year’s 75%, average rig revenue per day was up 25.3% year over year.

Meanwhile, higher average rig expenses per day and restructuring charges resulted in the segment’s operating profit to fall 40.7% from the prior-year period to $3 million.

International Solutions: The segment operations generated revenues of $22.5 million, down from $46.3 million in the prior-year quarter on lower revenue days and average rig revenue per day. Rig utilization decreased to 34% (from 51% a year ago).  

The average rig margin per day was negative at $1.9 million, compared to a profit of $8 million in the year-ago quarter. Consequently, the segment’s bottom line came in at a loss of $9.5 million, widening from the year-ago loss of $5 million.

Capital Expenditure & Balance Sheet

In the reported quarter, Helmerich & Payne spent $26.6 million on capital programs. As of Jun 30, 2020, the company had $426.2 million in cash and cash equivalents while long-term debt was $480.3 million (debt-to-capitalization of 12.4%).

Guidance

This Tulsa, OK-based company anticipates operating gross margins in the North America Solutions segment to be between $38 and $48 million inclusive of approximately $12 million of contract early termination compensation in the fiscal fourth quarter. The company sees around 58-63 contracted rigs by Sep 30, 2020.  

Coming to the Offshore Gulf of Mexico segment, Helmerich & Payne envisions operating gross margins within $5-7 million for the fiscal fourth quarter and operating income of $2 million.

Additionally, International Solutions operating gross margins are forecast to be between break even and a loss of $2 million for the current quarter.

For the current fiscal year, Helmerich & Payne estimates capital outlay within $150-$165 million.

In addition to the cost containment initiatives announced previously, the oil and gas contract driller expects to lower its cost structure by a further $25 million annually. This brings the total yearly savings to more than $75 million

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Helmerich & Payne has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Helmerich & Payne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.