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Why Is Dril-Quip (DRQ) Down 17.3% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Dril-Quip, Inc. (DRQ - Free Report) . Shares have lost about 17.3% 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 of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Second-Quarter 2017 Results

Dril-Quip reported better-than-expected second-quarter 2017 results 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 $0.09 per share that surpassed the Zacks Consensus Estimate of $0.01. Quarterly earnings, however, decreased significantly from $0.64 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.

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.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last month as none of them issued any earnings estimate revisions.

Dril-Quip, Inc. Price and Consensus

VGM Scores

At this time, Dril-Quip's stock has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 value investors based on our style scores.

Outlook

Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.




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