It has been about a month since the last earnings report for USA Compression Partners (USAC). Shares have added about 0.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is USA Compression due for a pullback? 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.
USA Compression Partners reported a third-quarter adjusted net profit of 13 cents per common unit, which missed the Zacks Consensus Estimate of 20 cents due to higher total costs and other expenses. However, the metric improved from the year-ago quarter's adjusted net profit of 9 cents per common unit on the back of a higher-than-expected revenue-generating capacity.
The largest independent provider of natural gas compression services generated revenues of $240 million, improving 10.5% from the year-ago quarter’s level and beating the Zacks Consensus Estimate of $238 million. This revenue growth was due to a 7.7% increase in Contract operations and a huge 162.5% jump in Related party revenues.
Adjusted EBITDA increased 11.9% to $145.7 million and surpassed our estimate of $142.5 million.
Distributable cash flow decreased from $86.6 million in the prior-year quarter to $71.6 million. The company reported a net income worth $19.3 million compared with $20.9 million a year ago.
The oil and gas equipment and services company reported net operating cash flow of $48.5 million in the third quarter, down from the prior-year quarter’s $50.1 million.
Adjusted gross operating margin of 65.9% marked an increase from the year-ago period’s 65.5%.
The company’s revenue-generating capacity increased 6.1% year over year to 3.6 million horsepower, surpassing the Zacks Consensus Estimate of 3.4 million horsepower by 0.1%. Further, the average monthly revenue per horsepower rose to $20.60 from $19.10 in the third quarter of 2023. The figure was below our estimate of $20.87.
Meanwhile, USA Compression’s average quarterly horsepower utilization rate was 94.6%, up from 93.6% a year ago.
USAC’s distributable cash flow available to limited partners totaled $86.6 million (providing 1.4X distribution coverage), up 20.9% from the year-ago level.
Notably, on Oct. 10, USAC declared cash distribution of 52.5 cents per unit ($2.10 on an annualized basis) in the third quarter. The distribution was paid on Nov. 1, 2024, to its common unitholders of record as of Oct. 21.
The company reported $164.3 million in costs and expenses, up 5.2% from the year-ago quarter’s $156.1 million. It spent $34.1 million on growth capex. Maintenance capex amounted to $9.1 million.
As of Sept. 30, 2024, USA Compression had a net long-term debt of $2.5 billion.
USA Compression expects net income to fall between $105 million and $125 million, adjusted EBITDA in the range of $565-$585 million and distributable cash flow to be between $345 million and $365 million for 2024.
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 10% due to these changes.
Currently, USA Compression has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, USA Compression has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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