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Why Is Helmerich & Payne (HP) Up 8.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Helmerich & Payne (HP). Shares have added about 8.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Helmerich & Payne 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.

Helmerich & Payne Q2 Loss Narrower Than Expected

Helmerich & Payne reported a fiscal second-quarter 2022 adjusted loss of 17 cents per share, narrower than the Zacks Consensus Estimate of 32 cents. In the year-ago period, the company had incurred a loss of 60 cents per share. The outperformance reflects a significant uptick in drilling activity.

Meanwhile, operating revenues of $467.6 million topped the Zacks Consensus Estimate of $439 million and increased 57.9% from the year-ago level on strong results from the key North America Solutions segment. Sales from the unit totaled $409 million, ahead of the consensus mark of $379 million.

Segment Performance

North America Solutions: In the quarter, operating revenues of $408.8 million were up 63.6% year over year on higher activity levels, with the average number of active rigs rising from 105 to 164. The increase drilling activity due to the surging oil and gas prices meant that the segment posted an operating profit of $1.3 million in comparison to the $109.8 million loss in the corresponding quarter last year.

Offshore Gulf of Mexico: Revenues of $29.1 million decreased by a mere 0.4% from the year-ago quarter’s figure of $29.3 million. However, the operating expenses during the January-March period of 2022 fell 9.5% year over year, resulting in the segment’s operating profit rising 77.2% from the prior-year period to $5.3 million.

International Solutions: The segment’s operations generated revenues of $27.4 million, up from $14.8 million in the corresponding period of 2021 due to improved activity levels, with the average number of active rigs rising from four to seven. However, the unit reported a loss of $848,000 on account of higher expenses, narrower than the loss of $3.5 million incurred in the corresponding period a year ago.

Financial Position

In the reported quarter, HP spent $60.5 million on capital programs. As of Mar 31, 2022, the company had $202.2 million in cash and cash equivalents, while the long-term debt was $541.97 million (debt-to-capitalization of 16.5%). The company repurchased around $16.6 million in stock during the quarter.

Guidance

This Tulsa, OK-based company anticipates the operating gross margins in the North America Solutions segment between $150 million and $165 million in the fiscal third quarter. It expects to exit the quarter with around 175 contracted rigs.

Coming to the Offshore Gulf of Mexico segment, Helmerich & Payne envisions the operating gross margins within $7 and $9 million for the fiscal third quarter.

Additionally, International Solutions’ operating gross margins are forecasted to be a loss between $3-$1 million in the next fiscal quarter.

For the current fiscal year, Helmerich & Payne estimates capital outlay within $250 and $270 million. The company maintains depreciation and amortization expenses of about $405 million, while research and development expenses for fiscal 2022 are expected at roughly $27 million.

However, SG&A expenses for fiscal 2022 are now anticipated to be more than $180 million.

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How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 116.67% due to these changes.

VGM Scores

Currently, Helmerich & Payne has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Helmerich & Payne has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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