A month has gone by since the last earnings report for USA Compression Partners (USAC Quick QuoteUSAC - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is USA Compression due for a breakout? 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 Reports Wider-Than-Expected Q2 Loss

USA Compression Partners, LP reported second-quarter 2020 adjusted net loss per unit of 6 cents, wider than the Zacks Consensus Estimate of a loss of 4 cents. The bottom line also compared unfavorably with the year-ago adjusted profit of a penny. The underperformance reflected lower utilization.

Revenues of $168.7 million were 2.9% lower than the year-ago quarter. However, the figure was in line with the Zacks Consensus Estimate due to higher-than-expected revenue-generating horsepower capacity, which, at 3,191,348 horsepower, surpassed the Zacks Consensus Estimate of 3,188,000 horsepower.

Adjusted EBITDA inched up 0.7% year over year to $105.5 million on cost-cutting initiatives. The partnership’s distributable cash flow rose from $54.1 million in the prior-year quarter to $58.7 million.

The partnership reported operating cash flow of $97.4 million in the quarter. This marked a slight decline from the $99.8 million that it had generated in the prior-year quarter. But gross operating margin, at 70.4%, was an improvement over the year-ago period’s 67.6%.

In the second quarter, the partnership’s revenue-generating horsepower capacity decreased 2.4% from last year’s corresponding period to 3,191,348 horsepower.  Meanwhile, the average monthly revenue per horsepower rose to $16.79 from $16.60 in the second quarter of 2019. However, USA Compression Partners’ average quarterly horsepower utilization rate came in at 88%, down from 94.6% in the year-ago period.

DCF, Capex & Balance Sheet

USA Compression Partners reported that its distributable cash flow (“DCF”) available to limited partners for the second quarter totaled $58.7 million (providing 1.15X distribution coverage), up 8.6% from the year-ago level. Notably, on Jul 21, the partnership announced second-quarter cash distribution of 52.50 cents per unit ($2.10 on an annualized basis).

USA Compression Partners spent $22.8 million on growth capex, while its maintenance capex consisted of $4.4 million.

As of Jun 30, 2020, the partnership had $1.9 billion in net long-term debt. Net debt-to-capitalization was approximately 80.6%.

Guidance

USA Compression Partners reiterated its growth capital spending guidance of $80-$90 million for 2020. The partnership is still projecting full-year DCF between $195 million and $215 million, while it sees adjusted EBITDA of $395-$415 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -12.5% due to these changes.

VGM Scores

At this time, USA Compression 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise USA Compression has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.