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Why Is Hi-Crush Partners LP (HCLP) Down 14.7% 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 14.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Hi-Crush Beats Earnings and Revenue Estimates in Q3

Hi-Crush delivered profit of $26.5 million or 29 cents per share in third-quarter 2018, down from $29.8 million or 32 cents in the year-ago quarter.

Barring one-time items, adjusted earnings came in at 36 cents, which beat the Zacks Consensus Estimate of 31 cents.

Revenues surged roughly 27.7% year over year to $214 million. The figure narrowly surpassed the Zacks Consensus Estimate of $212.4 million.

Total frac sand sold during third-quarter 2018 was 2,775,360 tons, up 13% year over year. Contribution margin per ton sold was up 23.4% year over year to $23.92. Volumes sold at the wellsite through PropStream and directly to E&Ps increased to 24% and 40% of total sales volumes, respectively.

Per the partnership, third-quarter results benefited from the increase in volumes sold through PropStream logistics services and sales directly to operators amid a challenging and rapidly evolving market scenario.

Operational Update

On Aug 1, 2018, Hi-Crush closed the acquisition of FB Industries Inc. At the end of the third quarter, there were 69 legacy FB Industries silo systems in the field.

As of Sep 30, 2018, the partnership had 16 PropStream container systems in the Permian Basin and Marcellus/Utica plays. Also, 16 of the 52 container systems developed by PropX were currently in the field. Hi-Crush expects to deploy nearly 60 PropX container systems by the end of 2018, of which 20 will be ready for operation for customers. Moreover, the partnership will have 8 silo systems under lease arrangements in November. The partnership has several silo systems in inventory that are ready to be deployed and it continues to build more systems by year-end.
 
Financial Position

As of Sep 30, 2018, the partnership had $175.4 million in cash and $97.7 million in available capacity under its revolving credit facility. Hi-Crush had outstanding long-term debt of roughly $444 million as of Sep 30, compared with $194.5 million a year ago.

Distribution

On Oct 21, the partnership declared quarterly cash distribution of 22.5 cents per unit on all common units, down from the previous quarterly cash distribution of 75 cents per unit. The distribution will be paid on Nov 14 to unitholders of record as of Nov 1.

Outlook

Hi-Crush witnessed rapid change in market conditions in the frac sand sector during the quarter, which led to the declines in well completion activity and frac sand demand. The change also affected the market for Northern White pricing and volumes, which is expected to continue in the fourth quarter.

The partnership expects total sales volumes for the fourth quarter in the range of 2.3-2.5 million tons. Notably, total volumes sold in the fourth quarter are likely to be affected by continued weakness in completions activity along with typical seasonal slowdowns. The partnership expects completions activity to increase in 2019 along with improving demand and supply dynamics for frac sand.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -109.82% due to these changes.

VGM Scores

At this time, Hi-Crush Partners LP has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Hi-Crush Partners LP has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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