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Dril-Quip (DRQ) Beats Q2 Earnings and Revenue Estimates

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Offshore drilling equipment maker, Dril-Quip Inc. (DRQ - Free Report) reported better-than-expected second-quarter 2017 earnings owning to higher activities in Eastern Hemisphere and the Asia-Pacific region, which was partially offset by increased expenses and lower product bookings.

The company reported second-quarter adjusted earnings of 9 cents per share that surpassed the Zacks Consensus Estimate of 1 cent. Quarterly earnings, however, decreased significantly from 64 cents in the year-ago quarter.

Total revenue of $127.9 million in the second quarter declined from the year-ago level of $142.4 million. However, the top line beat the Zacks Consensus Estimate of $102 million.

Dril-Quip, Inc. Price, Consensus and EPS Surprise

Dril-Quip, Inc. Price, Consensus and EPS Surprise | Dril-Quip, Inc. Quote

Costs Escalate

On the cost front, selling, general and administrative expenses rose from the year-earlier level of approximately $5.8 million to about $31.2 million. Engineering and product development costs were down 11% year over year from $11.6 million in the year-ago quarter to $10.3 million in the second quarter. Dril-Quip’s total cost and expense during the quarter was $129 million compared with $97.2 million in the year-ago quarter.

The company incurred operating loss of approximately $1.1 million against an operating income of $45.2 million in the year-earlier quarter.

Cash Flow

The company’s cash position grew significantly in the second quarter due to free cash flow generation of $19.1 million and a debt-free balance sheet compared with $6.6 million free cash flow in first-quarter 2017. This will help the company to execute its long-term strategies of acquiring potential assets and repurchasing its existing shares in the market. The company also intends to invest in research and development in the future.

Backlog

As of Jun 30, 2017, the company had backlog of $235 million compared with a backlog of roughly $296 million as of Mar 31, 2017.

About the Company

Dril-Quip manufactures highly engineered offshore drilling and production equipment for deepwater severe-service applications and harsh environmental conditions. The company designs and manufactures subsea and surface wellheads, subsea and surface production trees, mudline hanger systems, specialty connectors, and associated pipe, drilling and production riser systems, wellhead connectors and diverters, which are used on offshore rig equipment. Dril-Quip also provides installation and reconditioning services and rents tools for use in the installation and retrieval of its products. The company operates in two segments – Product Group and Services Group. 

Price Performance

Dril-Quip stock has lost 10.5% in the second quarter of 2017, outperforming the 20.3% loss of the industry it belongs to.

Zacks Rank and Stocks to Consider

The company currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector include Braskem S.A. (BAK - Free Report) , First Solar, Inc. (FSLR - Free Report) and Global Partners LP (GLP - Free Report) . These sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Braskem’s sales for 2017 are expected to increase 11% year over year. The company delivered an average positive earnings surprise of 107.8% in the last four quarters.

First Solar’s sales for the third quarter of 2017 are expected to increase 12.7% year over year. The company delivered an average positive earnings surprise of 524.2% in the last four quarters.

Global Partners’ sales for 2017 are expected to increase 10.2% year over year. The company delivered an average positive earnings surprise of 415.3% in the last four quarters.

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