It has been about a month since the last earnings report for Helmerich & Payne (HP). Shares have lost about 9.5% 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 drivers.
Helmerich & Payne Q1 Earnings Surpass Estimates
Helmerich & Payne reported a fiscal first-quarter 2025 adjusted net income of 71 cents per share, which topped the Zacks Consensus Estimate of 69 cents. The outperformance could be attributed to exceptional North America Solutions segment results.
However, the bottom line compared unfavorably with the year-ago quarter’s reported figure of 97 cents per share. This was due to weakness in the company's International Solutions segment.
Operating revenues of $677.3 million missed the Zacks Consensus Estimate of $691 million. In particular, sales from the Drilling Services totaled $674.6 million, which missed the consensus mark of $688 million.
HP’s board of directors declared a quarterly cash dividend of 25 cents per share to its common shareholders of record as of Feb. 14, and the payout will be made on Feb. 28.
In fiscal year 2025, the company expects its North America Solutions segment to continue generating significant cash flows. The company also believes that cash generated due to the lower Capex outlook and KCA Deutag's cash flow from operations will be used to reduce debt and provide competitive dividends to its shareholders.
Segmental Performance
North America Solutions: Operating revenues of $598.1 million increased a marginal 0.7% year over year, driven by market share accretion, with the average number of active rigs at 149. However, the top line missed the Zacks Consensus Estimate of $608 million as activity levels remain subdued.
Operating profit totaled $152 million compared with $144.5 million in the prior-year period, due to lower expenses. Moreover, the reported figure beat our estimate of $146 million.
International Solutions: Operating revenues of $47.5 million decreased 13.6% from the year-ago quarter’s level of $54.8 million and missed our projection of $51 million due to weakness in the key Saudi Arabia market.
Operating loss reached $15.2 million, compared to a profit of $5.4 million in the fiscal first quarter of 2024. The figure was also wider than the consensus mark for a loss of $6.2 million on start-up costs related to Helmerich & Payne’s Saudi Arabia operations.
Operating loss reached $15.2 million, compared to a profit of $5.4 million in the fiscal first quarter of 2024. The figure was also wider than the consensus mark for a loss of $6.2 million on start-up costs related to Helmerich & Payne’s Saudi Arabia operations.
Offshore Gulf of Mexico (Offshore Solutions): Revenues of $29.2 million increased 14.4% from the year-ago quarter’s level of $25.5 million but marginally missed our projection of $29.3 million.
Operating profit totaled $3.5 million, increasing 15% from that recorded in the prior-year period. The figure missed our estimate of $4.2 million. This was primarily on account of issues associated with the timing of some material and supply expenses.
Financial Position
In the reported quarter, this company spent $106.5 million on capital programs. As of Dec. 31, 2024, the company had $391.2 million in cash and cash equivalents, while the long-term debt totaled $1.8 billion (debt-to-capitalization of 37.7%).
HP’s Guidance for Q2 of Fiscal Year 2025
In the second quarter of fiscal year 2025, Helmerich & Payne expects operating gross margin to be in the range of $240-$260 million and $6-$8 million for North America Solutions and Gulf of Mexico (Offshore Solutions) legacy operations, respectively. The company anticipates ending the quarter with 146-152 contracted rigs for North America Solutions.
HP expects International Solutions' direct margins (for the legacy business) to be between $7 million and $3 million, exclusive of any foreign exchange gains or losses. The company expects KCA Deutag's contributions to its Gulf of Mexico’s (Offshore Solutions) direct margins to be in the band of $18-$25 million.
Helmerich & Payne estimates a capital outlay to be in the range of $360 to $395 million for fiscal year 2025. The company anticipates that ongoing asset sales, including reimbursements for lost and damaged tubulars and sales of other used drilling equipment, will offset a portion of these expenditures and are projected to total $45 million in the fiscal year 2025.
The company still expects depreciation and amortization expenses to be $400 million, as the purchase price accounting of the KCA Deutag acquisition has not yet been integrated. Research and development expenses are expected to total $32 million. General and administrative expenses are anticipated to be $280 million. Cash taxes are anticipated to be in the $190-$240 million range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -12.79% due to these changes.
VGM Scores
Currently, 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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