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Hi-Crush (HCLP) Stock Down 67% YTD: Is a Turnaround Possible?

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Shares of Hi-Crush Partners LP (HCLP - Free Report) have plunged 67.3% year to date compared with the industry’s 12.8% decline.



The partnership has a market cap of roughly $352 million. Average volume of shares traded in the past three months was around 2,193K.  

Let’s take a look at the factors that are affecting the partnership.

Factors Weighing on the Stock

Concerns over expected decline in frac sand demand and slowdown in well completion activity are likely weighing on the stock.

In September, Hi-Crush temporarily idled dry plant operations at the Whitehall facility. This is considered a strategic move by the partnership, which was driven by recent and temporary softness in frac sand demand as well as completions activity.

Hi-Crush, during third-quarter earnings call, stated that it witnessed rapid change in market conditions in the frac sand sector. Consequently, well completion activity and frac sand demand declined.

The downsides also affected the market for Northern White pricing and volumes. The partnership anticipates the trend to persist in the fourth quarter. Moreover, the partnership projects total sales volumes in the range of 2.3-2.5 million tons for the fourth quarter. Notably, total volumes sold in the fourth quarter are likely to be affected by weakness in completion activity along with typical seasonal slowdowns.

Will the Stock Rebound?

The partnership expects the abovementioned headwinds to abate in early 2019 and throughout the year. As such, it expects an improvement in the demand environment in the next year.

Moreover, Hi-Crush is also developing a second facility — Kermit 2. Construction works at the facility is underway and expected to be complete by the end of 2018. This is likely to add 3 million tons per year of new contracted production capacity. Per the partnership, post the full ramp up of Kermit 2, it will add total in-basin Permian production capacity of 6 million tons per year.

We believe these factors will benefit Hi-Crush Partners’ results going forward, and lift its share price. However, for the time being the stock is likely to remain under pressure.

Hi-Crush Partners LP Price and Consensus

 

Hi-Crush Partners LP Price and Consensus | Hi-Crush Partners LP Quote

 

Zacks Rank & Stocks to Consider

Hi-Crush currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the basic materials space are Verso Corporation (VRS - Free Report) , The Mosaic Company (MOS - Free Report) and Cameco Corporation (CCJ - Free Report) .

Verso has an expected earnings growth rate of 570.7% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have rallied 32% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mosaic has an expected earnings growth rate of 75.2% for the current year and has a Zacks Rank #2 (Buy). The company’s shares have moved up 14.7% in the past year.

Cameco has an expected earnings growth rate of 66.7% for the current year and also carries a Zacks Rank #2. Its shares have gained 20.8% in a year’s time.

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