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U.S. Silica (SLCA): What Will Q1 Earnings Release Unveil?

U.S. Silica Holdings, Inc. SLCA is set to release first-quarter 2016 results after the closing bell on Apr 26.

Last quarter, this producer of commercial silica had delivered a negative earnings surprise of 62.50%. Let’s see how things are shaping up for this announcement.

Factors to Consider

U.S. Silica reported a net loss of $15.3 million (or 29 cents per share) in fourth-quarter 2015 against a net income of $33.2 million (or 61 cents per share) in the year-ago quarter. Results were hurt by lower oil prices and continued decline in rig count which severely affected the company’s Oil and Gas business.

Revenues plunged around 45% year over year to $136.1 million in the fourth quarter. However, the figure marginally surpassed the Zacks Consensus Estimate of $135 million. The top line was adversely impacted by lower sales volumes coupled with falling oil prices. Overall sales volume declined 18% year over year in the quarter to 2.5 million tons.

The company expects the rig count to fall another 30% to 35% during 2016. It anticipates continued low oil prices in 2016 with downward pressure on both its volumes and profitability in Oil and Gas. Moreover, excess rail cars continue to be a major drag on its earnings. Roughly 40% of the company’s 7,000 railcar fleet is idled currently.

However, the company aims to stay keenly focused on preserving capital, making further cost cuts, improving customer satisfaction and boosting its market position in 2016. The company will trim capital spending this year, giving priority to critical maintenance projects and cost improvement actions. It is executing many cost improvement projects throughout its supply chain. U.S. Silica expects its capital expenditures for 2016 to be in the range of $15–$20 million.

Earnings Whispers

Our proven model does not conclusively show that U.S. Silica is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP for U.S. Silica is -10.71%. This is because the Most Accurate Estimate stands at a loss of 31 cents, while the Zacks Consensus Estimate is pegged at a loss of 28 cents.

Zacks Rank: U.S. Silica currently has a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies in the basic materials sector you may want to consider instead, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Barrick Gold Corporation ABX has an Earnings ESP of +12.50% and a Zacks Rank #3 (Hold).

Agnico Eagle Mines Limited AEM has an Earnings ESP of +50% and a Zacks Rank #3.

Air Products and Chemicals, Inc. APD has an Earnings ESP of +0.56% and a Zacks Rank #2 (Buy).

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US SILICA HOLDI (SLCA): Free Stock Analysis Report
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