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RPC (RES) Stock Declines 13.2% Despite Q2 Earnings Beat

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RPC, Inc. (RES - Free Report) shares declined 13.2% since the second-quarter earnings announcement on Jul 28. Investors are expecting growth in business from U.S. shale plays to remain slow as the coronavirus-induced uncertainty continues to hurt upstream operations, which will continue to hurt the oilfield service provider. The company also increased its capital expenditure for 2021, which, in turn, will affect its free cash flows.

The company reported break-even earnings per share for second-quarter 2021, beating the Zacks Consensus Estimate of a loss of 2 cents and comparing favorably with the year-ago loss of 10 cents.

Total quarterly revenues were $188.8 million, which missed the Zacks consensus mark of $206 million. The top line, however, significantly improved from the year-ago figure of $89.3 million.

The earnings beat was mainly backed by higher operating profits in the Technical Services segment. The positives were partially offset by higher cost of revenues. Significant operational delays and extreme rain experienced in the Permian Basin also affected the quarterly activity levels.

RPC, Inc. Price, Consensus and EPS Surprise

 

Segmental Performance

Operating profit in the Technical Services segment totaled $1.4 million against a loss of $34.1 million in the year-ago quarter. The improvement can be attributed to higher activity levels in most of the service lines.

Operating loss in the Support Services segment came in at $2.4 million, wider than the unit’s operating loss of nearly $2 million in the year-ago quarter. The downside was caused by lower activities.

Total operating loss for the quarter was $1.2 million, significantly narrower than the year-ago loss of $37.5 million. Average domestic rig count was 453 for the June-end quarter, reflecting a 15.6% increase from the year-ago level.

Cost and Expenses

Cost of revenues increased from $80 million in second-quarter 2020 to $145.8 million. Selling, general and administrative expenses increased to $29.4 million from the year-ago figure of $28.8 million.

The increased cost of revenues was mainly due to higher expenses, consistent with higher activity levels and higher fuel costs.

Financials

RPC’s total capital expenditure for the June-end quarter of 2021 amounted to $14.1 million.

As of Jun 30, the company had cash and cash equivalents of $121 million, up sequentially from $85.4 million reported in the first quarter. Despite the volatile market scenario, it maintained a debt-free balance sheet.

Guidance

For 2021, RPC expects a capital expenditure of $65 million, marking an increase from the previously mentioned $55 million.

As of Jun 30, 2021, the company spent $25.9 million of the total revised capex guidance. For the rest of 2021, the remaining capex will be directed mostly toward capitalized maintenance and upgrades of its existing equipment, which includes selected pressure pumping equipment for dual-fuel capability.

Zacks Rank & Other Stocks to Consider

RPC currently carries a Zacks Rank #2 (Buy).

Some other top-ranked players in the energy space are Southwestern Energy Company (SWN - Free Report) , Geopark Ltd (GPRK - Free Report) and Cabot Oil & Gas Corporation , each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwestern’s earnings for 2021 are expected to rise 21.5% year over year.

Geopark’s earnings for 2021 are expected to surge 129.7% year over year.

Cabot’s earnings for 2021 are expected to increase 16.8% year over year.


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