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Why Is Patterson-UTI Energy (PTEN) Down 9.3% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Patterson-UTI Energy, Inc. (PTEN - Free Report) . Shares have lost about 9.3% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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.

Fourth Quarter 2016 Results

Patterson-UTI Energy Inc. reported loss per share of $0.53, in line with the Zacks Consensus Estimate. A pick-up in drilling activity was offset by tight margins.

However, Patterson-UTI’s performance deteriorated from the year-ago loss of $0.40 per share.

Revenues of $246.9 million were down 27% from the year-ago quarter but were higher than the Zacks Consensus Estimate of $236 million.

Segmental Performance

Contract Drilling: This segment’s revenues totaled $136.1 million (55% of total revenue), down 33% year over year.

Average revenues per operating day decreased to $21,640 from $24,240 in the fourth quarter of 2015, while average direct costs per operating day came in at $13,770, up from $12,640 in the year-ago quarter.

The segment was also impacted by a steep decline in both the operating days (from 8,344 to 6,288) and the number of rigs operational (from 91 to 68) on the back of severe stress in the oil and gas industry.

Consequently, the segment recorded operating loss of $62.5 million – wider than the loss of $25.5 million incurred in the year-earlier quarter.

Pressure Pumping: Revenues of $105.6 million were down 20% year over year. Moreover, the segment reported a loss of $40.1 million, worsening from the loss of $37.8 million in the prior-year quarter. Despite recent improvements, the segment continues to be weighed down by tight spending from exploration and production firms that impacted activity levels. To make matters worse, even the work that has been available is making less profits.

Other Operations: Revenues came in at $5.2 million, 12% higher than the year-ago quarter. The rebound in commodity prices meant that the unit incurred a narrower quarterly loss of $1.1 million, as against the loss of $3.2 million recorded in year-ago quarter.

Direct Operating Costs

The company reported direct operating expenses of $189.4 million, reflecting a 17% decrease from $226.8 million reported in the year-ago quarter.     

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $39.3 million on capital programs (as against $135.6 million in the fourth quarter of 2015). Capital expenditure for the full-year 2016 came in at $119.8 million (down 84% from 2015).

As of Dec 31, 2016, the company had $35.2 million in cash and $598.4 million in long-term debt.

Outlook

Patterson-UTI management remains upbeat over its business following the recovery in land rig count and the recent bullishness in activity and pricing. In fact, the company sees 2017 as an exciting year in the making.

Patterson-UTI expects an average of 44 rigs to be operational under term contracts during the first quarter and 37 for the entire 2017. In pressure pumping, the company expects first quarter revenues to rise 25% from the fourth quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Patterson-UTI pegged its 2017 capital spending projection at $350 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to three lower. In the past month, the consensus estimate has shifted by 5.37% due to these changes.

VGM Scores

At this time, Patterson-UTI Energy's stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with an 'A'. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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