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Why Is Hi-Crush Partners LP (HCLP) Down 20.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Hi-Crush Partners LP (HCLP - Free Report) . Shares have lost about 20.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hi-Crush Partners LP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Hi-Crush Misses Q2 Earnings and Revenue Estimates

Hi-Crush reported net income of $68 million or 67 cents per share in second-quarter 2018, up from $16.4 million or 18 cents in the year-ago quarter. However, earnings missed the Zacks Consensus Estimate of 77 cents.

Revenues surged roughly 83.8% year over year to $248.5 million, driven by improved pricing and increased volumes. The figure narrowly missed the Zacks Consensus Estimate of $248.7 million.

In the second quarter, contribution margin was $30.94 per ton sold compared with $16.73 in the year-ago quarter.

Operational Update

On Jul 23, 2018, the company inked a purchase deal to acquire FB Industries Inc for roughly $60 million along with potential additional performance based payments. The move makes it the industry's sole vertically-integrated provider of proppant logistics solutions and frac sand, with a diverse production base. The deal is expected to close in the third quarter, subject to customary closing conditions.

Hi-Crush expects to deploy 15-20 FB silo systems by the end of this year. At the end of the second quarter, the company had 14 PropStream crews in the Marcellus/Utica plays and the Permian Basin, up 16.7% from 12 crews at the end of the first quarter.  

Financial Position

As of Jun 30, 2018, the company had $25.4 million in cash and $103.6 million in available capacity under its Revolving Credit Agreement compared with $85.7 million in cash and available capacity as of Jun 30, 2017.

It had total outstanding long-term debt of $194.9 million as of Jun 30, 2018 compared with $194.5 million a year ago.

Dividend Distribution

On Jul 20, the company declared quarterly cash distribution of 75 cents per unit on all common units, up from the previous quarterly cash distribution of 22.5 cents. The dividend will be paid on Aug 14 to unitholders of record as of Aug 3.

Outlook

For third-quarter 2018, the company expects total sales volume to increase to the range of 3-3.2 million tons. Per the partnership, the projected volumes sold reflect the expectation of consistent completions activity. Also, it expects pricing to improve slightly in the third quarter of 2018.

Hi-Crush also stated that the outlook for frac sand remains positive and witnesses strong and increasing demand across its product portfolio.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.41% due to these changes.

VGM Scores

Currently, Hi-Crush Partners LP has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hi-Crush Partners LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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