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Why Is Helmerich & Payne (HP) Down 0.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Helmerich & Payne (HP - Free Report) . Shares have lost about 0.3% 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 drivers.

Helmerich & Payne Q4 Earnings Miss, Sales Beat

Helmerich & Payne reported a fourth-quarter fiscal 2024 adjusted net income of 76 cents per share, which missed the Zacks Consensus Estimate of 79 cents. The underperformance was due to weakness in the company's International Solutions and Gulf of Mexico segments.

However, the bottom line topped the year-ago quarter’s reported figure of 69 cents per share. This was due to an improvement in the company's North America Solutions segment.

Operating revenues of $693.8 million outpaced the Zacks Consensus Estimate of $687.2 million. Sales from the Drilling Services totaled $691 million, which beat the consensus mark of $684 million. The figure increased 5.2% from the year-ago quarter.

HP’s board of directors declared a quarterly cash dividend of 25 cents per share to its common shareholders of record as of Nov. 18 and the payout will be made on Dec. 02.

In fiscal 2024, the company allocated $200 million of free cash flow to declare a base dividend, a supplemental dividend and share repurchases. The company expects to continue to allocate $100 million to declare an annual base dividend of $1/share, and the priority will be on using the free cash flow to reduce the debt burden incurred in connection with the KCA Deutag acquisition.

Segmental Performance

North America Solutions: Operating revenues of $618 million increased 7.5% year over year due to higher activity levels and its maintenance of direct margin at a healthy level, with the average number of active rigs at 151. The top line beat our projection of $580.4 million.

Operating profit totaled $155.7 million compared with $128.5 million in the prior-year period. Moreover, the reported figure beat our estimate of $135.1 million.

International Solutions: Operating revenues of $45.5 million decreased 14.5% from the year-ago quarter’s level of $53.2 million and also missed our projection of $49.1 million.

Operating loss reached $5.1 million, widening 1.5% from that recorded in the prior-year period. But the figure came better than our projection of a loss of $4.2 million.

Offshore Gulf of Mexico: Revenues of $27.5 million decreased 4.6% from the year-ago quarter’s level of $28.9 million and marginally missed our projection of $27.6 million.

Operating profit totaled $4.3 million, down 8.5% from that recorded in the prior-year period. The figure also missed our estimate of $4.8 million.

The reason for underperformance is the reduction in the number of active rigs to three as compared to four last year.

Financial Position

In the reported quarter, the company spent $495.1 million on capital programs. As of Sept. 30, 2024, the company had $217.3 million in cash and cash equivalents, while the long-term debt totaled $1,782.2 million (debt-to-capitalization of 38%).

Guidance for Q1 & FY25

In the first quarter of fiscal 2025, Helmerich & Payne expects operating gross margin to be in the range of $260-$280 million and $7-$9 million for North America Solutions and Offshore Gulf of Mexico, respectively. The company anticipates ending the quarter with 147-153 contracted rigs for North America Solutions.

HP expects International Solutions' direct margins to be between $(2) million and $2 million, exclusive of any foreign exchange gains or losses. The company also expects offshore Gulf of Mexico direct margins to be in the band of $7-$9 million.

Helmerich & Payne estimates a capital outlay to be in the range of $290 to $325 million for fiscal year 2025. The company anticipates that ongoing asset sales, including reimbursements for lost and damaged tubular and sales of other used drilling equipment, will offset a portion of these expenditures and are projected to total $45 million in the fiscal year 2025.

The company expects depreciation and amortization expenses of $400 million and research and development expenses of $32 million. General and administrative expenses are anticipated to be $235 million. Cash taxes are anticipated to be in the $140-$190 million range.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -15.96% due to these changes.

VGM Scores

At this time, Helmerich & Payne has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 Helmerich & Payne has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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