Helmerich & Payne (HP) Down 9.3% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Helmerich & Payne, Inc. (NYSE:HP) . Shares have lost about 9.3% in the past month, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is HP 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.

Recent Earnings

Helmerich & Payne reported first-quarter fiscal 2018 adjusted operating loss of 2 cents per share, narrower than the Zacks Consensus Estimate of a loss of 14 cents.The outperformance was primarily driven by higher drilling activity at its biggest segment – U.S. Land. The bottom line also compared favorably with the year-ago adjusted loss of 41 cents.

Revenues of $564.1 million topped the Zacks Consensus Estimate of $538 million. Further the top line witnessed an increase of more than 53% from the year-ago number of $368.6 million.

Segment Performance

U.S. Land: During the quarter, operating revenues totaled $461.6 million (81.8% of total revenues), up 75.1% year over year. While average rig revenue per operating day was $22,400 — 10.7% below the year-ago period — average rig margin per day was down 7.6% to $8,854. However, utilization levels of 57% in the quarter under review (versus 31% in first-quarter fiscal 2017) resulted in an operating income of 24.7 million at the segment marking a turn around from the year-ago loss of $30.9 million.

Offshore: Helmerich & Payne’s Offshore revenues came in at $33.4 million compared with $33.8 million in the prior-year quarter. Daily average rig revenue rose 14.2% to $35,776 and average rig margin per day rose 18.1% to $12,375. Owing to this, the segment’s operating income increased 28.6% to $8.7 million. However, rig utilization came down from the year-ago level of 78% to 63%.

International Land: Helmerich & Payne’s International Land operations generated revenues of $63.2 million, down slightly from $68 million in the previous-year quarter. Average daily rig revenue was $38,039, down 32% from the corresponding period of last year and rig margin per day was $11,351, down from the year-ago figure of $12,969.

However, average rig expense per day decreased 38%, while activity levels increased to 45% from 33% a year ago. As a result, the segment’s operating income was $3.5 million as against the year-ago income of $0.8 million.

Capital Expenditure & Balance Sheet

During the quarter, Helmerich & Payne spent approximately $91.7 million on capital programs. As of Dec 31, 2017, the company had approximately $383.7 million in cash, while long-term debt stood at $493.2 million (debt-to-capitalization ratio of 9.7%).

Guidance

The Tulsa, OK-based company expects activity in the U.S. land segment to rise by 3-4% sequentially during the second fiscal quarter of 2018. While the average rig revenue per day is likely to be flat compared with the first fiscal quarter, daily average rig cost is expected to be roughly $13,900 during next quarter.

As for the offshore segment, Helmerich & Payne sees the average rig margin per day to be around $11,500 during second-quarter fiscal 2018 and revenue days to fall 2% sequentially.

The international land segment will likely suffer a 4% decrease in revenue days during the next quarter, while average rig margin per day is expected to average roughly $8,000.

For fiscal 2018, Helmerich & Payne projects a capital budget of $350 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been three moves higher compared to one lower two months ago. In the past month, the consensus estimate has shifted up by 49.1% due to these changes.

Helmerich & Payne, Inc. Price and Consensus

Helmerich & Payne, Inc. Price and Consensus | Helmerich & Payne, Inc. Quote

VGM Scores

At this time, HP has an average Growth Score of C, however its Momentum is doing a lot better with an A. However, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, HP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.