Silica Holdings (SLCA) Down 72.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Silica Holdings (SLCA). Shares have lost about 72.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Silica Holdings due for a breakout? 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.

U.S. Silica's Earnings and Sales Beat Estimates in Q4

U.S. Silica reported net loss of $293.4 million or $3.99 per share in fourth-quarter 2019, wider than a loss of $256.1 million or $3.44 per share in the year-ago quarter.

Barring one-time items, adjusted loss per share was 53 cents, which was narrower than the Zacks Consensus Estimate of a loss of 56 cents.

U.S. Silica generated revenues of $339.1 million, down 5.1% year over year. Nevertheless, the figure beat the Zacks Consensus Estimate of $296.1 million.

2019 Highlights

The company reported net loss of $329.1 million or $4.49 per share in 2019, wider than net loss of $200.8 million or $2.63 in 2018.

Revenues fell 6.5% year over year to $1.47 billion in 2019.

Segment Highlights

Revenues in the Oil & Gas sand division amounted to $234.3 million, down 3.8% year over year. Overall sales volume fell 9% year over year to 3.362 million tons. Oil & Gas contribution margin increased 34% sequentially and 25% year over year to $68 million.

Revenues in the Industrial and Specialty Products division amounted to $104.8 million in the fourth quarter, down 8% year over year. Overall sales volume fell 10% year over year to 0.842 million tons. The segment’s contribution margin was $39.1 million in the quarter, down around 12% both sequentially and year over year.

Financials

At the end of 2019, the company’s cash and cash equivalents declined 8.3% year over year to $185.7 million. Long-term debt was $1,214 million, up 2.6% year over year.

The company also generated operating cash flow of $27.7 million in the fourth quarter.

Outlook

U.S. Silica is making substantial progress in repositioning its Oil & Gas business and right sizing its proppant volumes for matching the current and expected demand from well completions. In 2020, it expects proppant demand to rise around 5% year over year.

In 2019, the company’s last-mile business made considerable investments in next generation equipment for Sandbox. In 2020, U.S. Silica expects pricing pressure in Sandbox to persist.

For the Industrial and Specialty Products business, the company is shifting toward higher margin products. It is also pursuing many growth initiatives like using innovative technology in milling, which will expand its capabilities and differentiate products.

The company plans to increase the base Industrial and Specialty Products business through market share gains, price hikes, focus on new, higher-margin products and small, bolt-on acquisitions.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted 10.16% due to these changes.

VGM Scores

Currently, Silica Holdings has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Silica Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.