A few years ago it was the best of times for ceramic proppant
CARBO Ceramics Inc.
) as strong demand and tight supply pushed earnings to record
highs. But international imports are hurting pricing power and 2013
estimates are being slashed.
CARBO Ceramics is the world's largest maker of ceramic proppant
which is used during the hydraulic fracturing process. In the last
couple of years, its product was one of the hottest in the energy
industry. But then dry gas prices came down and international
competitors increased production of proppant.
In 2011, earnings soared to a record of $5.61 per share but it's
been downhill since then. In 2012 earnings fell 17.6% to $4.62.
They're expected to fall another 25% to $3.45 in 2013.
As cheaper exports came onto the market, CARBO has cut ceramic
proppant pricing by 14% in the last year in order to maintain its
volume. It is also pushing back the opening of further capacity
After it missed the first quarter Zacks Consensus Estimate by 14%,
analysts cut full year guidance. 8 estimates have been cut for 2013
in the last 30 days. That has pushed the Zacks Consensus down to
$3.45 from $4.27.
No Rally in the Shares
While the rest of the stock market hits new highs, CARBO's shares
have been mired in a 2-year slump.
Some may think this is buying opportunity. But shares are trading
with a forward P/E of 20. That's not exactly cheap when you compare
it to bigger, and more diversified, oil service companies like
) which is a Zacks Rank #2 (Buy) trading at 13.5x.
CARBO Ceramics is a Zacks Rank #5 (Strong Sell). In the near term,
CARBO will probably continue to struggle. The Zacks Rank, however,
is a short term recommendation.
Over the longer term, analysts aren't as bearish. 2014 can't come
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CARBO CERAMICS (CRR): Free Stock Analysis
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