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Hi-Crush (HCLP) to Post Q3 Earnings: What's in the Cards?

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Hi-Crush Partners LP (HCLP - Free Report) is set to release third-quarter 2018 results on Oct 30, after the closing bell.

In the last reported quarter, the mining company delivered a negative earnings surprise of 13% by posting earnings of 67 cents per share, which missed the Zacks Consensus Estimate of 77 cents.

Revenues went up around 84% year over year to $248.5 million, driven by improved pricing and increased volumes. However, the figure narrowly missed the Zacks Consensus Estimate of $248.7 million.

Notably, Hi-Crush beat the Zacks Consensus Estimate in two of the trailing four quarters while missing twice, with an average negative surprise of 7.3%.

The stock has lost 51% in the past three months, compared with the industry’s 15.9% decline.


 

Will the company surprise investors this quarter or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.

Factors at Play in Q3

In September, Hi-Crush announced that it has temporarily idled dry plant operations in the Whitehall facility. The strategic move was driven by the recent, temporary softness in frac sand demand and completions activity. The company’s updated guidance for sales volumes of 2.8-3 million tons (down from prior expectation 3-3.2 million tons) for the third quarter also reflects this reduced activity.  

However, the facility’s wet plant is operational and continues to sell inventory from on-site storage, catering to the Northern White customer demand. Dry and wet plants also remain operational at the company’s other Wisconsin mines, including Augusta, Blair and Wyeville.

Moreover, the company stated that its Kermit facility continues to run above nameplate capacity. It anticipates strong demand for Northern White and its in-basin Permian sand in 2019 and beyond.

The Zacks Consensus Estimate for consolidated revenues for the third quarter is currently pegged at $222 million, reflecting an expected rise of around 32.1% year over year. However, the projected figure indicates an expected sequential decline of roughly 10.8%. Total revenues from frac sand is projected to witness a roughly 1.9% sequential increase in the third quarter, as the Zacks Consensus Estimate is currently pegged at $217 million.

Hi-Crush, during second-quarter earnings call, noted that the market environment for frac sand is supportive. The company witnessed a significant volumes increase during the last reported quarter driven by the improvement in rail service issues. The company is collaborating with the rail partners on key initiatives, which includes maximizing train length. The move is expected to drive efficiencies across its business going forward.

Moreover, Hi-Crush should gain from its PropStream integrated logistics (last mile) service expansion that efficiently expands the reach and delivery of production facilities as well as operated terminal networks directly to customers. The PropStream integrated logistics service is also providing cost savings, boosting efficiency and is contributing to the growth of the company’s contribution margin.

The company is on track to add at least 20 PropStream container crews by the end of 2018 (14 crews already deployed at the end of the second quarter). The annual growth in PropStream crews has aided the company to double volumes that it is able to sell directly at the wellsite.

Hi-Crush Partners LP Price and EPS Surprise

 

Hi-Crush Partners LP Price and EPS Surprise | Hi-Crush Partners LP Quote

 

Earnings Whispers

Our proven model does not show that Hi-Crush is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

Earnings ESP: Earnings ESP for Hi-Crush is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 45 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hi-Crush currently carries a Zacks Rank #4 (Sell). Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

CF Industries Holdings, Inc. (CF - Free Report) has an Earnings ESP of +8.33% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here
 
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and carries a Zacks Rank #2.

Arconic Inc. (ARNC - Free Report) has an Earnings ESP of +6.42% and carries a Zacks Rank #3.

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