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Dril-Quip (DRQ) Q4 Earnings and Revenues Beat Estimates

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Dril-Quip, Inc. DRQ reported fourth-quarter 2019 adjusted earnings per share of 23 cents, beating the Zacks Consensus Estimate of 12 cents. The company had reported a loss of 4 cents in the year-ago quarter.

It registered total revenues of $108.5 million in the quarter compared with around $97 million in the year-ago period. Also, the figure beat the Zacks Consensus Estimate of $104 million.

The strong quarterly results were aided by its realigned sales organization and reduced operating expenses as a result of cost-saving initiatives. Moreover, a rise in fabricated joint revenues boosted quarterly numbers.

Dril-Quip, Inc. Price, Consensus and EPS Surprise

Dril-Quip, Inc. Price, Consensus and EPS Surprise

Dril-Quip, Inc. price-consensus-eps-surprise-chart | Dril-Quip, Inc. Quote

Fourth-Quarter Performance

Dril-Quip reported product bookings of $101 million in the quarter. The reported figure was above the higher end of its guided range of $75-$95 million. Notably, the company’s new products fetched 13% of full-year 2019 product bookings of $388 million.

Operating income of $6.1 million significantly improved from a loss of $98.8 million in the prior-year quarter.

Total Costs and Expenses Decline

On the cost front, cost of sales jumped to $75.7 million in the reported quarter from $68.7 million in the year-ago period. Selling, general and administrative expenses declined to $21.4 million from the year-ago level of $25 million. Engineering and product development costs fell to $4.8 million in the quarter from the year-ago level of $9.3 million. Total cost and expenses during the quarter totaled $102.4 million compared with $196.2 million in the year-ago period. The company’s cost-saving initiatives, which commenced last year, helped it to reduce expenses.

Share Buyback

In the fourth quarter, the company repurchased 490,052 shares under the stock buyback program (approved on Feb 26, 2019) at an average price of $43.25 per share, totaling $21.2 million. In full-year 2019, it bought back 615,940 shares and returned $26.6 million to its shareholders.

Free Cash Flow

Dril-Quip’s free cash flow in the fourth quarter was $5.2 million versus negative $8 million in the year-ago period.

Backlog

At the end of fourth-quarter 2019, the company had $272 million in backlog, up from $270 million as of Dec 31, 2018.

Financials

The company recorded $2.9 million capital expenditure in the quarter, lower than the year-ago level of $5.4 million.

As of Dec 31, 2019, its cash balance was $399 million. Also, the balance sheet of the company is free from debt load, which indicates sound financial position. In fact, it expects no headwinds to dent long-term growth plan.

Guidance

For first-quarter 2020, the company expects product bookings in the range of $85-$105 million. It expects revenues within $95-$105 million, as its Singapore operations got disrupted due to quarantines and travel bans following the coronavirus outbreak. Also, the company expects to record positive free cash flow for the current year.

Zacks Rank & Stocks to Consider

Dril-Quip currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector include Natural Gas Services Group, Inc. NGS, Superior Energy Services, Inc. SPN and Hess Corporation HES, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Natural Gas Services’ earnings for 2020 are expected to rise 65% year over year.

Superior Energy’s bottom line for first-quarter 2020 is expected to rise 42.9% year over year.

Hess’ bottom line for 2020 is expected to rise 91.6% year over year.

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