Dril-Quip (DRQ) Q4 Loss Narrower Than Expected, Revenues Beat

Dril-Quip Inc (NYSE:DRQ) reported fourth-quarter 2018 adjusted loss per share of 4 cents, which was narrower than the Zacks Consensus Estimate of a loss of 23 cents. The company reported earnings of a penny in the year-ago quarter.

The company registered total revenues of $97.3 million compared with $107.9 million in the year-ago quarter. Nevertheless, the reported figure surpassed the Zacks Consensus Estimate of $85 million.

The quarterly results were affected by fall in demand for offshore exploration and production equipment, particularly subsea equipment. This was partially offset by increased product sales in Asia Pacific.

In 2018, the company incurred a loss of 63 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 74 cents. The company generated earnings of 26 cents in the year-ago quarter.

In 2018, total revenues declined 15.6% year over year to $384.6 million. Nevertheless, the figure beat the Zacks Consensus Estimate of $374.6 million.

Costs

On the cost front, selling, general and administrative expenses fell from the year-ago quarter’s level of approximately $31.1 million to about $25 million. Engineering and product development costs declined 13% year over year. Dril-Quip’s total cost and expenses during the quarter totaled $196.2 million compared with $113.1 million in the year-ago quarter.

Cash Flow

As of Dec 31, 2018, the cash balances of the company rose to $418.1 million. Rise in Dril-Quip’s cash balances were driven by $6.5 million free cash flow earned in the October-to-December period. Also, the balance sheet of the company is free from debt load, which reflects sound financial position. In fact, the company expects no headwinds to dent long-term growth plan.

Q4 Price Performance

During the fourth quarter, the stock declined 41.7% compared with the industry’s fall of 47.4%.

Guidance

Dril-Quip projects first-quarter 2019 revenues in the range of $90-$100 million. The company anticipates annualized savings of about $50 million by the end of 2019.

Share Repurchases

The board of directors authorized up to $100 million in share repurchases with no set expiration date on July 26, 2016. During the fourth quarter of 2018, the company repurchased about $19.1 million or 376,583 shares of common stock at an average price of $50.60 per share. These purchases completed the authorized amount of $100 million under the repurchase plan. This led to repurchase of a total of 1,991,206 shares at an average price of $50.22 per share. The company retired all of the shares repurchased as of Dec 31, 2018.

Zacks Rank & Key Picks

Dril-Quip carries a Zacks Rank #4 (Sell).

Investors interested in the energy sector can opt for some better-ranked stocks as given below.

CrossAmerica Partners L.P. (NYSE:CAPL) is involved in the wholesale distribution of motor fuels, consisting of gasoline and diesel fuel. The company delivered average positive earnings surprise of 436.7% in the last four quarters. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

San Antonio, TX-based NuStar Energy L.P. (NYSE:NS) is a midstream energy company. For 2019, the bottom line, which has witnessed three upside revision in the past 30 days, is expected to grow 64.2% year over year. The company currently holds a Zacks Rank #2 (Buy).

Madrid, Spain-based Repsol (MC:REP), S.A. (OTC:REPYY) is an integrated energy company. The bottom line for 2019 is expected to increase 13.7% year over year. The company delivered average positive earnings surprise of 9% in the trailing four quarters. The stock currently has a Zacks Rank #2.

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