Dril-Quip Inc. ( DRQ Quick Quote DRQ - Free Report) shares have declined 9% despite reporting better-than-expected second-quarter 2022 results on Jul 28. Investors are concerned about the manufacturer of highly engineered drilling and production equipment generating negative free cash flows, which reflect its operational weakness.
Dril-Quip reported a second-quarter 2022 adjusted loss per share of 10 cents, narrower than the Zacks Consensus Estimate of a loss of 12 cents. The bottom line improved from the year-ago loss of 53 cents per share.
The company registered total quarterly revenues of $94 million, beating the Zacks Consensus Estimate of $87 million. The top line also increased from the year-ago quarter’s $81 million.
The second-quarter results were supported by an increase in product revenues as a result of higher subsea product volumes.
Dril-Quip reported product bookings of $49.6 million for the quarter. At the second-quarter end, it had $208.6 million in the backlog.
The company reported a second-quarter operating loss of $3.9 million, narrower than a loss of $14.7 million in the prior-year period.
Total Costs and Expenses
On the cost front, the cost of sales increased to $69.7 million for the reported quarter from $61.5 million in the year-ago period. However, engineering and product development costs contracted to $2.7 million in the quarter from the year-ago figure of $3.7 million. Selling, general and administrative costs declined to $22.5 million from $29.6 million a year ago.
Total costs and expenses for the quarter were $97.8 million compared with $95.5 million a year ago.
Free Cash Flow
In the second quarter, Dril-Quip generated a negative free cash flow of $10.6 million against a cash flow of $8.2 million a year ago.
Dril-Quip recorded $1.4 million in capital expenditure for the quarter versus the year-ago level of $3.5 million.
As of Jun 30, 2022, the company’s cash balance was $320.8 million. Its balance sheet is free of debt load, which highlights a sound financial position.
For 2022, Dril-Quip expects products bookings to increase 20% year over year. The company reiterated its capital expenditure guidance at $15-$17 million for the year.
The Zacks Rank #3 (Hold) company announced plans to reduce scope 1 and scope 2 greenhouse gas emissions by 50% by 2030.
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