Dril-Quip (DRQ) Q4 Earnings Miss Estimates, Deteriorate Y/Y

Dril-Quip Inc (NYSE:DRQ) reported fourth-quarter 2017 adjusted earnings per share of a penny that fell below the Zacks Consensus Estimate of 3 cents and the year-ago quarter profit of 23 cents, thanks to higher expenses.

The company registered total revenues of $107.9 million in the quarter compared with $106 million a year ago. The reported figure also surpassed the Zacks Consensus Estimate of $102 million.

Operating loss of $5.1 million was wider than the year-earlier loss of $4.6 million.

On the cost front, selling, general and administrative expenses increased from the year-earlier level of approximately $21.7 million to about $31.1 million. Engineering and product development costs, however, declined 15% year over year. Dril-Quip’s total cost and expenses during the quarter totaled $113.1 million, compared with $110.7 million in the year-ago quarter.

Cash Flow

As of Dec 31, 2017, the cash balances of the company rose to $493.2 million. The rise in Dril-Quip’s cash balances was driven by $25.2 million free cash flow earned in the October to December period. The balance sheet of the company is also free from debt load, reflecting a sound financial position. In fact, the company expects no headwinds to hinder its long-term growth plan.

Q4 Price Performance

The pricing chart reveals that the company’s shares have outperformed the industry in the October-to-December quarter. During this period, the stock has rallied 8.1% as against the industry’s decline of 1.8%.

Guidance

Dril-Quip projects revenues in 2018 in the range of $380-$420 million. The company anticipates its backlog to rise through 2018 with crude likely to hover in the healthy band of $55-$65 per barrel.

Zacks Rank & Key Picks

Dril-Quip carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector are Statoil (OL:STL) ASA (NYSE:STO) , Pioneer Natural Resources Company (NYSE:PXD) and Concho Resources Inc. (NYSE:CXO) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Stavanger, Norway, Statoil is a major international integrated energy player. The company is expected to witness year-over-year earnings growth of 17.1% in 2018.

Headquartered at Irving, TX, Pioneer Natural Resources is an upstream energy firm. The company has an average positive earnings surprise of 66.9% for the last four quarters.

Headquartered in Midland, TX, Concho is also an upstream energy company. The firm will likely see year-over-year earnings growth of 73.2% in 2018.

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