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Dril-Quip (DRQ) Down 7.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Dril-Quip (DRQ). Shares have lost about 7.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dril-Quip 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 drivers.

 

Dril-Quip Q4 Earnings & Revenue Miss Estimates

Dril-Quip reported fourth-quarter 2020 adjusted loss per share of 12 cents, wider than the Zacks Consensus Estimate of a loss of a penny. In the year-ago period, the company reported a profit of 23 cents per share.

It registered total revenues of $87 million for the quarter, lower than $108 million in the year-ago period. Moreover, the figure missed the Zacks Consensus Estimate of $89 million.

Fourth-Quarter Performance

Dril-Quip reported product bookings of $36 million for the quarter. The company added that the uncertain business scenario owing to the coronavirus pandemic has hurt its product bookings.  Notably, the company recorded fourth-quarter operating loss of $11.6 million, wider than a loss of $2.1 million in the prior-year quarter.

Total Costs and Expenses

On the cost front, cost of sales declined to $64.1 million for the reported quarter from $67.2 million in the year-ago period. Engineering and product development costs, however, rose marginally to $4 million for the quarter from the year-ago figure of $3.9 million. Total cost and expenses for the quarter totaled $98.9 million compared with $93.4 million a year ago.

Free Cash Flow

Dril-Quip’s free cash outflow for the fourth quarter was $18.5 million. For fourth-quarter 2019, the company’s free cash flow was recorded at $5.2 million.

Backlog

At fourth quarter-end, it had $196 million in backlog, down from $273 million as of Dec 31, 2019.

Financials

Dril-Quip recorded $1.7 million capital expenditure for the quarter versus the year-ago level of $1.9 million.

As of Dec 31, 2020, its cash balance was $346 million. It had total available liquidity of $386.2 million. The company’s balance sheet is free of debt load, which highlights a sound financial position.

Guidance

For 2021, the leading manufacturer of highly engineered drilling and production equipment expects product bookings worth $40 million to $60 million per quarter. In the back half of this year, the company expects to see modest improvement since economies are reopening.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -113.33% due to these changes.

VGM Scores

Currently, Dril-Quip has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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. It's no surprise Dril-Quip has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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