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Is a Beat in Store for U.S. Silica (SLCA) in Q3 Earnings?

U.S. Silica Holdings, Inc. SLCA is set to release third-quarter 2017 results after the closing bell on Nov 6.

Last quarter, the company delivered a profit of $29.5 million or 36 cents per share, as against a net loss of $11.8 million or 19 cents in the prior-year quarter. Barring one-time items, U.S. Silica’s adjusted earnings came in at 38 cents per share in the quarter, beating the Zacks Consensus Estimate of 37 cents.

The company gained from strong demand and pricing gains for frac sand and continued strength in the oil & gas market in the quarter.

Revenues for the reported quarter was $290.5 million, a roughly two-and-a-half-fold year-over-year jump. It, however, missed the Zacks Consensus Estimate of $309.8 million. Overall sales volume jumped 63% year over year in the quarter to around 3.6 million tons.

U.S. Silica surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 23.6%.

U.S. Silica’s shares have moved up 14.7% in the last three months outperforming the 1.5% growth recorded by its industry.  

 


 

Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.

Earnings Whispers

Our proven model shows that U.S. Silica is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Zacks ESP: Earnings ESP for U.S. Silica for the third quarter is +2.73%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 50 cents and 48 cents, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: U.S. Silica currently carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

U.S. Silica, in July, announced that it now expects its capital expenditures for 2017 to be in the range of $325-$375 million, up from $125-$150 million expected earlier. The company sees higher sand demand in the third quarter and for the remainder of 2017. The company expects to witness further strength in well completions and sand usage per well.

Revenues for the company’s Oil & Gas division for the third quarter is projected to increase roughly 14.9% from the second quarter as the Zacks Consensus Estimate for the third quarter is pegged at $270 million. In the second quarter, the company witnessed a roughly three-and-a-half-fold year-over-year surge in sales for this segment, reflecting robust demand and pricing growth for Sandbox and frac sand last mile delivery services.

Moreover, the Zacks Consensus Estimate for Industrial and Specialty Products division’s revenues is expected to be $57 million for the third quarter, reflecting an estimated 3.6% growth on a sequential-comparison basis.  

U.S. Silica’s healthy balance sheet provides it with ample opportunities for making strategic investments that will ensure its long-term competitive position in the market. U.S. Silica also continues to evaluate opportunities for greenfield expansions in the Permian Basin and is also expanding production capacities and efficiencies across some of its existing facilities.

U.S. Silica remains focused on pursuing acquisitions of complementary businesses or assets. The purchase of logistics solutions provider, Sandbox Enterprises has allowed U.S. Silica to offer its customers significantly improved transportation and operating efficiencies and meaningful cost savings relative to the existing delivery systems. The acquisition is also expected to deliver earnings accretion of between 20 cents and 30 cents per share in 2017.

However, elevated capital expenditure associated with expansion actions is a concern for the company. The company is seeing significant cash outflows.

Moreover, inconsistent demand for sand led to lower-than-expected sand volumes in the second quarter and remains a headwind for the company in third-quarter 2017.

Other Stocks Poised to Beat Estimates

Here are some other companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

Westlake Chemical Corporation WLK has an Earnings ESP of +1.08% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Southern Copper Corporation SCCO has an Earnings ESP of +4.00% and carries a Zacks Rank #1.

Versum Materials Inc. VSM has an Earnings ESP of +9.47% and carries a Zacks Rank #3.

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Westlake Chemical Corporation (WLK): Free Stock Analysis Report
 
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