Fairmount Santrol's 4Q16: A Mixed Story in Four Parts

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Fairmount Santrol's 4Q16: A Mixed Story in Four Parts PART 1 OF 4

Fairmount Santrol’s 4Q16 Results versus Estimates

Fairmount Santrol’s 4Q16 revenue

Fairmount Santrol Holdings (FMSA) released its 4Q16 financial results on March 9. The company recorded total revenues of $140.5 million for 4Q16, which was 4% higher than its ~$135 million in 4Q15. The ~26% higher sales volume YoY (year-over-year) in 4Q16 largely accounted for the revenue gain.

As compared to 3Q16, Fairmount Santrol’s revenues were resilient, rising 4.3%. But Schlumberger (SLB), FMSA’s larger market cap peer, saw its revenues fall 8% YoY in 4Q16. Halliburton’s (HAL) 4Q16 revenue fell 21% YoY. while Superior Energy Services’ (SPN) 4Q16 revenues fell 14% YoY during the same quarter. (Check out Market Realist’s Halliburton: A Word on the 4Q16 Results for more on the company.)

Fairmount Santrol&#8217;s 4Q16 Results versus Estimates

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Fairmount Santrol’s 4Q16 earnings

The 4Q16 adjusted EPS (earnings per share) for Fairmount Santrol came in at -$0.09, falling marginally short of the consensus sell-side analysts’ EPS estimate for the reported quarter. Steep gross profit growth in FMSA’s Proppant Solutions segment, offset by lower YoY gross profit in the Industrial & Recreational Products segment in 4Q16, led to its adjusted earnings nearly meeting analysts’ estimates.

As compared to 4Q15, FMSA’s adjusted loss improved marginally in 4Q16. On average, the company’s adjusted EPS exceeded the consensus estimate for EPS significantly over the past ten quarters. Notably, Fairmount Santrol makes up 3.7% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES).

What affected FMSA’s reported earnings in 4Q16?

In 4Q16, FMSA’s reported net loss was ~$20 million, which represents a significant improvement over 4Q15, when FMSA reported a ~$91-million net loss. As compared to 3Q16, when Fairmount Santrol’s net loss was ~$20.6 million, the reported earnings in 4Q16 did not change much. For the quarter, FMSA’s earnings were affected by various one-time items, including the following:

  • $8.1 million gain on the repurchase of debt
  • $2.5 million goodwill and other asset impairments charges

Now let’s discuss FMSA’s growth drivers in 4Q16.


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