RPC Earnings: Here’s Why the Stock is Falling Now

RPC Inc. (NYSE:RES) delivered a profit and missed Wall Street’s expectations, AND came up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company. Shares are down 10.58%.

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RPC Inc. Earnings Cheat Sheet

Results: Adjusted Earnings Per Share decreased 56.76% to $0.16 in the quarter versus EPS of $0.37 in the year-earlier quarter.

Revenue: Decreased 15.27% to $425.8 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: RPC Inc. reported adjusted EPS income of $0.16 per share. By that measure, the company missed the mean analyst estimate of $0.25. It missed the average revenue estimate of $472.35 million.

Quoting Management: “During the first quarter of 2013, RPC faced increasingly competitive pricing pressures in all of our markets,” stated Richard A. Hubbell, RPC’s President and Chief Executive Officer. “Competition remains fierce, as additional competitors continue to negatively impact the market rates for our services. Most of the contractual arrangements in our pressure pumping service line expired during 2012, and we now operate the majority of our fleets in the spot market. In the current operating environment, this change has resulted in lower utilization and pricing. The average U.S. domestic rig count during the first quarter was 1,758, an 11.7 percent decrease compared to the same period in 2012 and a 2.8 percent decrease compared to the fourth quarter of 2012. The average price of natural gas was $3.50 per Mcf, a 45.2 percent increase compared to the prior year, and a 4.2 percent increase compared to the fourth quarter of 2012. The average price of oil during the quarter was $94.40 per barrel, an 8.3 percent decrease compared to the prior year. However, the average price of oil increased 7.2 percent compared to the fourth quarter of 2012. The average price of benchmark natural gas liquids was $0.87 during the first quarter of 2013, a 31.3 percent decrease compared to the first quarter of 2012, and a 3.3 percent decrease compared to the fourth quarter of 2012. The unconventional rig count, which remains an important indicator of the demand for RPC’s services, decreased by 5.2 percent compared to the prior year, and during the first quarter of 2013 represented 74.9 percent of U.S. domestic drilling activity. RPC’s revenues declined more than the decline in domestic rig count compared to both the prior quarter and the prior year due to our increased exposure to spot market pricing and our significant exposure to the pressure pumping market, which has endured more pricing weakness than many other service lines.”

Key Stats (on next page)…

Revenue decreased 9.39% from $469.94 million in the previous quarter. EPS decreased 38.46% from $0.26 in the previous quarter.

Looking Forward: Analysts have a neutral outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings is a profit of $0.24 and has not changed. For the current year, the average estimate is a profit of $1.00, which is the same with that ninety days ago.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at] wallstcheatsheet.com)

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