A month has gone by since the last earnings report for Dril-Quip (DRQ). Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dril-Quip due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Dril-Quip Q4 Loss Narrower than Expected, Falls Y/Y
Dril-Quip Inc reported fourth-quarter 2018 adjusted loss per share of 4 cents, which was narrower than the Zacks Consensus Estimate of a loss of 23 cents. The company reported earnings of a penny in the year-ago quarter.
The company registered total revenues of $97.3 million compared with $107.9 million in the year-ago quarter. Nevertheless, the reported figure surpassed the Zacks Consensus Estimate of $85 million.
The quarterly results gained from rise in demand for offshore exploration and production equipment, particularly subsea equipment. This was partially offset by higher costs.
In 2018, the company incurred a loss of 63 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 74 cents. The company generated earnings of 26 cents in the year-ago quarter.
In 2018, total revenues declined 15.6% year over year to $384.6 million. Nevertheless, the figure beat the Zacks Consensus Estimate of $374.6 million.
Costs
On the cost front, selling, general and administrative expenses fell from the year-ago quarter’s level of approximately $31.1 million to about $25 million. Engineering and product development costs declined 13% year over year. Dril-Quip’s total cost and expenses during the quarter totaled $196.2 million compared with $113.1 million in the year-ago quarter.
Cash Flow
As of Dec 31, 2018, the cash balances of the company rose to $418.1 million. Rise in Dril-Quip’s cash balances were driven by $6.5 million free cash flow earned in the October-to-December period. Also, the balance sheet of the company is free from debt load, which reflects sound financial position. In fact, the company expects no headwinds to dent long-term growth plan.
Guidance
Dril-Quip projects first-quarter 2019 revenues in the range of $90-$100 million. The company anticipates annualized savings of about $50 million by the end of 2019.
Share Repurchases
The board of directors authorized up to $100 million in share repurchases with no set expiration date on July 26, 2016. During the fourth quarter of 2018, the company repurchased about $19.1 million or 376,583 shares of common stock at an average price of $50.60 per share. These purchases completed the authorized amount of $100 million under the repurchase plan. This led to repurchase of a total of 1,991,206 shares at an average price of $50.22 per share. The company retired all of the shares repurchased as of Dec 31, 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 70.83% due to these changes.
VGM Scores
Currently, Dril-Quip has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Dril-Quip has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Dril-Quip, Inc. (DRQ): Free Stock Analysis Report
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