A month has gone by since the last earnings report for Patterson-UTI (PTEN). Shares have lost about 13.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Patterson-UTI due for a breakout? 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 catalysts.
Patterson-UTI Q2 Earnings & Sales Miss
Patterson-UTI Energy reported second-quarter 2024 adjusted net profit of 5 cents per share, missing the Zacks Consensus Estimate of 9 cents. This underperformance was mainly due to poor contribution from the Drilling Services segment.
Total revenues of $1.3 billion missed the Zacks Consensus Estimate of $1.4 billion. However, the top line increased 77.7% year over year. This outperformance can be attributed to PTEN's increased year-over-year revenue contribution from its Completion Services segment.
Patterson, a leading provider of oilfield services and products to oil and natural gas exploration and production companies, will pay its quarterly dividend of 8 cents per share on Sep 16, 2024, to the company’s shareholders of record as of Sep 3.
PTEN returned $164 million to its shareholders in the second quarter and $295 million in the first half of the year. The Houston, TX-based oil and gas drilling company repurchased 12 million shares for $132 million in the second quarter.
Since completing the NexTier merger and Ulterra acquisition, PTEN returned a total of $407 million to its shareholders, including repurchase of 28 million shares worth $309 million in this period. The company has $819 million remaining in its share repurchase authorization as of Jun 30, 2024.
Segmental Performances
Drilling Services: Revenues in this segment totaled $440.3 million, down 10.1% from the prior-year quarter’s figure of $489.7 million. Additionally, the top line was also below our projection of $441.5 million.
Operating profit amounted to $76.1 million compared with $113.3 million in the second quarter of 2023. However, the figure marginally beat our estimate of $75.6 million. The company secured approximately $433 million in term contracts for the U.S. drilling rigs as of Jun 30, 2024.
Completion Services: This segment’s revenues of $805.4 million rose about 221.8% from the year-ago quarter’s figure of $250.2 million. However, the metric missed our projection of $860.3 million.
Operating profit totaled $10.7 million compared with $25.3 million in the second quarter of 2023. Additionally, the figure missed our estimate of $35.8 million.
Drilling Products: Revenues totaled $86.1 million, missing our estimate of $90.4 million. However, the operating profit of $8.6 million exceeded our estimate, which anticipated an operating loss of $8.4 million.
Other Services: Revenues amounted to $16.5 million, 13.2% lower than the year-ago quarter’s figure of $19 million. The figure missed our projection of $17.9 million.
Operating profit amounted to $0.4 million compared with an operating loss of $0.6 million in the second quarter of 2023. The figure beat our projection of an operating loss of $0.1 million.
Capital Expenditure & Financial Position
In the reported quarter, PTEN spent $130.5 million on capital programs compared with $132.4 million in the prior year period. As of Jun 30, 2024, the company had cash and cash equivalents worth $75 million and long-term debt of $1219.2 million. The company’s debt-to-capitalization was 20.9%.
This Zacks Rank #4 (Sell) company generated $563.4 million in cash from operations and $206 million in free cash flow. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Outlook
By 2024, the company anticipates generating free cash flow from adjusted EBITDA at a rate of 40%.
The company’s management expects relatively steady industry drilling activity compared to current levels for the rest of the year. PTEN anticipates that its customers will continue to manage their annual budgets through completion activity, likely impacting frac activity with higher-than-normal calendar white space persisting through year-end. The company also believes that much of the impact from its customer consolidation and weak natural gas prices is already reflected in current industry activity.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -54% due to these changes.
VGM Scores
At this time, Patterson-UTI 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. It's no surprise Patterson-UTI has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Patterson-UTI Energy, Inc. (PTEN) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
