Silica Holdings (SLCA) Down 3.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Silica Holdings (SLCA). Shares have lost about 3.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Silica Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

U.S. Silica's Earnings and Revenues Miss Estimates in Q3

U.S. Silica slipped to loss of $23 million or 31 cents per share in third-quarter 2019 from profit of $6.3 million or 8 cents per share in the year-ago quarter.

Adjusted loss was 17 cents per share, which was wider than the Zacks Consensus Estimate of loss of 4 cents.

U.S. Silica generated revenues of $361.8 million, declining around 14.5% year over year. The figure missed the Zacks Consensus Estimate of $394.8 million.

The company witnessed seasonal slowdown in the demand for sand in its Oil & Gas unit in the reported quarter.

Segment Highlights

Revenues in the Oil & Gas division were $242.7 million, down 20% year over year. Overall sales volume rose 2% year over year to 3.896 million tons. Oil & Gas contribution margin declined 44% year over year to $50.6 million or $12.98 per ton.

Revenues in the ISP division were $119.1 million in the quarter, down 1% year over year. Overall sales volume fell 3% year over year to 0.954 million tons. ISP contribution margin was $44.4 million or $46.52 per ton in the quarter under review, down 9% year over year.

Financials

At the end of the third quarter, cash and cash equivalents were down 84.5% year over year to $187.3 million. Long-term debt was roughly $1,216.8 million, up 2.8% year over year.

The company also generated operating cash flow of $33.9 million in the quarter.

Outlook

It witnessed delays in purchasing decisions by certain customers in the Industrial & Specialty Products unit. Increased level of uncertainty in global industrial markets, intensified by tariffs, political uncertainty and increasing risk of economic slowdown makes it tough for the company to provide forecast for the business. The fourth quarter is usually characterized by a seasonal decrease in profitability of roughly 10%, per the company.

U.S. Silica expects a slowdown in North America completion activity to unfavorably impact the Oil & Gas unit’s fourth-quarter results. The company expects Oil & Gas sand volume to decline roughly 10% sequentially in the fourth quarter. Moreover, it anticipates contribution margin per ton to decrease on lower sand and SandBox volumes, loss of fixed cost leverage, continuous pricing pressure, lower expected customer shortfall penalties, and other contractual fees.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -258.33% due to these changes.

VGM Scores

Currently, Silica Holdings has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 Silica Holdings has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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