RPC (RES) To Report Q4 Earnings: Disappointment In The Cards?

RPC, Inc. (NYSE:RES) is set to release fourth-quarter 2018 financial results before the opening bell on Jan 23, 2019.

The company failed to beat the Zacks Consensus Estimate for earnings in each of the last four reported quarters, recording a negative earnings surprise of 20.2%. Let’s see how things are shaping up for this announcement.

Which Way are Estimates Trending?

Let’s take a look at estimate revisions to get a clear picture of what analysts are thinking about the company before the earnings release.

The Zacks Consensus Estimate for revenues of the company is pegged at $387.4 million for the to-be-reported quarter, reflecting a decrease of 9.3% from the year-ago quarter.

The Zacks Consensus Estimate of 10 cents for the fourth quarter has seen one upward but two downward revisions by firms in the past 30 days. It reflects a year-over-year decline of about 44.4%.

Factors Likely to Influence the Upcoming Quarterly Results:

The intensified competition in the domestic market has left limited rooms for the oilfield services companies to charge premium prices for the services being offered. In fact, RPC has no immediate intention for ordering more pressure pumping equipment, reflecting the possibility of slowdown of demand for pressure pumping services in the shale plays.

Moreover, drillers and explorers are redirecting their focus from the crowded Permian to other plays. In the Permian Basin, there is a dearth of pipeline capacity for transporting oil to Gulf Coast export facilities, major refinery terminals and principal hubs like Cushing. Since RPC gets the largest oilfield services contracts from the Permian, constrained drilling activities in the basin can affect its results.

Let’s see where these factors can lead the Q4 results to.

Technical Services Segment: The Zacks Consensus Estimate for revenues from the segment is pegged at $373 million, down from $411 million in the year-ago period and $421.3 million in the last reported quarter. Moreover, the Zacks Consensus Estimate for operating profit from the segment is pegged at $29.5 million, down from $56.2 million and $67 million on a sequential and year-over-year basis, respectively.

Support Services Segment: The Zacks Consensus Estimate for the segment’s revenues is pegged at $17.9 million, up from $16.3 million in the year-ago period but down from $18.7 million in the last reported quarter. Moreover, the Zacks Consensus Estimate for the segment’s operating profit is pegged at $1.2 million, up from operating loss of $1.6 million in the year-ago quarter but down from $1.8 million profit sequentially.

Earnings Whispers

Our proven model does not conclusively show that RPC is likely to beat the Zacks Consensus Estimate in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP: Earnings ESP represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. RPC’s Earnings ESP is pegged at -5.06%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: RPC’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP, making us less confident of an earnings surprise call.

As it is, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks With Favorable Combination

Here are some companies from the energy space, which, according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Tulsa, OK-based The Williams Companies, Inc. (NYSE:WMB) has a Zacks Rank #2 and an Earnings ESP of +9.09%. The company will report fourth-quarter earnings on Feb 13. You can see the complete list of today’s Zacks #1 Rank stocks here.

Leawood, KS-based Tallgrass Energy, LP (NYSE:TGE) holds a Zacks Rank #2 and has an Earnings ESP of +2.44%. The company is scheduled to report fourth-quarter earnings on Jan 31.

Houston, TX-based Targa Resources Corp. (NYSE:TRGP) carries a Zacks Rank #3 and has an Earnings ESP of +38.46%. The company is anticipated to report quarterly results on Feb 21.

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