Yahoo Finance Why Is Helmerich & Payne (HP) Down 8.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Helmerich & Payne (HP). Shares have lost about 8.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Helmerich & Payne 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.
Helmerich & Payne Q2 Earnings Beat Estimates
Helmerich & Paynereported second-quarter fiscal 2024 adjusted net income of 86 cents per share, which marginally beat the Zacks Consensus Estimate of 85 cents. Operating profit from the International Solutions unit totaled $3.6 million, which beat the consensus estimate of a loss of $1.6 million. However, the bottom line was below the year-ago quarter’s reported figure of $1.26. This was primarily due to the poor performance of the company's segments.
Operating revenues of $687.9 million outpaced the Zacks Consensus Estimate of $680 million. Sales from the North America Solutions unit totaled $613.3 million, which beat the consensus mark of $601 million. However, the figure decreased 10.6% from the year-ago quarter’s level.
In good news for investors, Helmerich & Payne is using the excess cash from a supportive environment to reward investors with dividends and buybacks. HP’s board of directors declared a quarterly cash dividend of 25 cents per share to its common shareholders of record as of May 17. The payout will be made on May 31. In addition to the regular dividend, HP declared a supplemental cash dividend of 17 cents per share.
In the second quarter, the company distributed roughly $46 million to its shareholders through a combination of dividends and stock buybacks. This included $25 million in regular dividends, $17 million in special dividends and $4 million used to repurchase shares.
Segmental Performance
North America Solutions: Operating revenues of $613.3 million were down 9.2% year over year on lower activity levels, with the average number of active rigs at 155. The top line beat our projection of $591.7 million.
Operating profit totaled $147.1 million compared with $182.1 million in the prior-year period. The reported figure missed our estimate of $166 million. The decline in drilling activity levels during the quarter can be attributed to this underperformance.
Offshore Gulf of Mexico: Revenues of $25.9 million decreased 26% from the year-ago quarter’s level of $35 million. The top line also missed our projection of $26.7 million.
Operating profit totaled $78,000, down 98.8% from that recorded in the prior-year period. The figure also missed our estimate of $3.8 million.
International Solutions: Sales in this segment decreased 17.9% from the year-ago quarter’s level of $55.9 million. The figure also missed our projection of $53.7 million.
Operating profit totaled $3.6 million compared with $4 million in the prior-year quarter. The figure also exceeded our projection of a loss of $2,000.
Financial Position
In the reported quarter, HP spent $254.7 million on capital programs. As of Mar 31, 2024, the company had $193.6 million in cash and cash equivalents, while the long-term debt totaled $545.4 million (debt-to-capitalization of 16.3%).
Guidance
For the third quarter of fiscal 2024, Helmerich & Payne expects operating gross margin to be in the range of $255-$275 million and $5-$8 million for North America Solutions and Offshore Gulf of Mexico, respectively. The company expects to exit the quarter with approximately 145-151 contracted rigs from North America Solutions.
HP expects International Solutions' direct margins to fall within the range of negative $2 million to $2 million, excluding any gains or losses from foreign exchange, but including around $10-$12 million for rig preparation and start-up expenses linked to operations in Saudi Arabia.
Helmerich & Payne estimates a $500 million capital outlay in 2024. The company projects depreciation and amortization expenses of $405 million, and research and development expenses of $37 million during the year. General and administrative expenses are anticipated to be $240 million. Cash taxes are projected to be in the $150-$200 million range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -8.91% due to these changes.
VGM Scores
At this time, Helmerich & Payne has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Helmerich & Payne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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