RPC, Inc.’s (RES - Free Report) troubles seem to be never ending. The oilfield service provider, which has lost 51.4% of its value over the past year, is traversing rough waters amid several headwinds. The struggle is likely to continue as the company’s prospects appear bleak, in view of lower expenditure from upstream companies.
The pricing chart shows that RPC has underperformed the Zacks Oil And Gas - Field Services industry, which has declined 29.4% in the past year.
Let’s delve into the factors that have taken a toll on the firm.
Intensified competition in the domestic market has left limited room for oilfield services companies to charge premium prices for the services being offered. Moreover, slowdown of demand for pressure pumping services in shale plays mars RPC’s prospects. This is evident from third-quarter 2019 results, wherein weakness stemmed from lower activity levels and pricing in the company’s pressure pumping service business, which in turn affected the bottom line. Also, pressure pumping is likely to remain soft in North America. This business being RPC’s biggest service line, the firm’s business outlook appears gloomy.
Explorers and producers are constrained by the reduction in capacity for borrowings and an increase in the cost of capital. Also, explorers are facing constant pressure from investors for higher returns instead of production growth. These headwinds are likely to lower investments by explorers and producers in the North American land market. Hence, conservative spending by customers is likely to hurt demand for the company’s services.
Commodity prices will continue to remain in the bearish territory as demand for energy remains low, owing to a slowdown in global economic growth. Thus, explorers and producers are not getting enough incentives to produce hydrocarbon volumes in a massive scale. The drop in production volumes will likely keep demand for oilfield services low.
The Oil and Gas - Field Services industry currently has a Zacks Industry Rank of 239 out of 255 (Bottom 6%). As the industry is not expected to perform impressively in the coming days, the stock will likely underperform the market.
The above-mentioned factors are being reflected in the company’s downward earnings estimate revisions.
Earnings Estimate Revisions
The Zacks Consensus Estimate for RPC’s 2019 loss is pegged at 17 cents, which has witnessed no upward movement but 10 downside estimate revisions in the past 60 days. This suggests fall of 120.7% from the year-ago reported figure.
Given these headwinds, RPC seems a risky bet that investors should avoid at the moment. This is reflected in its Zacks Rank #5 (Strong Sell).
Stocks to Consider
Some better-ranked stocks in the energy sector include CNX Resources Corporation (CNX - Free Report) , Antero Midstream Corporation (AM - Free Report) and Frank's International N.V. (FI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CNX Resources’ earnings for the current year have witnessed four upward revisions in the past 60 days versus no movement in the opposite direction.
Antero Midstream’s bottom line for the current quarter is expected to skyrocket 130% year over year.
Frank's International’s bottom line for 2019 is expected to rise 23.8% year over year.
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