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Why Is ProPetro (PUMP) Up 101.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for ProPetro Holding (PUMP - Free Report) . Shares have added about 101.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ProPetro due for a pullback? 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 drivers.

ProPetro Misses on Q4 Earnings, Revenues Up Y/Y

ProPetro Holding reported fourth-quarter net income per share of 25 cents, missing the Zacks Consensus Estimate of 42 cents and below the year-ago period's bottom-line figure of 59 cents. The underperformance stems from holiday seasonality and tepid demand for the company’s services as clients – the upstream energy players – take a cautious approach to capital spending amid depressed oil and gas prices.   

ProPetro’s revenues of $434.8 million missed the Zacks Consensus Estimate by 0.35%. However, the top-line improved 2.2% year over year, driven by improved operating efficiency and lower downtime.

Adjusted EBITDA in the fourth quarter amounted to $110.3 million, decreasing from $112.4 million a year ago.

Pressure Pumping Division

This Midland, TX-based ProPetro, through its Pressure Pumping division, provides hydraulic fracturing, cementing and acidizing functions. The business accounted for 97.7% of the company's total revenues in the quarter under review.

Costs & Expenses

ProPetro reported cost of services of $305.7 million in fourth-quarter 2019, 1.8% higher than the year-ago quarter. Meanwhile, general and administrative expenses came in at $31.1 million, up from the year-ago period.

Balance Sheet & Capital Expenditure

As of Dec 31, ProPetro had cash and cash equivalents of $149.03 million while its long-term debt was $130 million. The company’s debt-to-capitalization ratio was 11.8%. ProPetro also has $49.7 million available under the revolving credit facility. Capital expenditure for the three months reached $66.3 million, down 82% compared to the fourth quarter of 2018.

Guidance

By now, we all know that the oil price is persistently trending in the bear market territory following the coronavirus pandemic’s adverse impact on global energy demand. As a result, the outlook for all industries in the energy sector business seems gloomy. Thus, energy players are restricting their operational activities by trimming capital budgets.

Last week, ProPetro announced plans to cut an unspecified number of jobs as it struggles with a weak industry environment and the coronavirus-induced demand destruction. The oilfield services provider further said that it will lower its maintenance capex and field costs significantly, while looking to strike a bargain with suppliers for pricing concessions on materials and replacement parts. ProPetro declared that it has no big growth capital spending lined up for the remainder of 2020. As of Mar 20, the company had zero net debt, with $178 million in total liquidity.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -46.67% due to these changes.

VGM Scores

At this time, ProPetro has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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. Notably, ProPetro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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