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

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Part 3
Fairmount Santrol's 4Q16: A Mixed Story in Four Parts PART 3 OF 4

How Fairmount Santrol’s Stock Reacted to the 4Q16 Results

Fairmount Santrol’s stock price reaction

Fairmount Santrol (FMSA) released its financial results for 4Q16 on March 9, 2017. On that day, its stock price reacted negatively, falling ~16% the from previous day’s close to $7.30.

Schlumberger (SLB), the largest OFS (oilfield equipment and services) company by market capitalization, fell 1% following the release its financial information for 4Q16 on January 20. (Read Market Realist’s Why Did Schlumberger’s 4Q16 Earnings Beat Estimates? to know more about Schlumberger’s 4Q16 earnings.)

How Fairmount Santrol&#8217;s Stock Reacted to the 4Q16 Results

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FMSA’s stock price returns versus industry

In the past year, Fairmount Santrol’s stock has risen 189% (as of March 9). The 31% rise in the crude oil price over the past year helps explain FMSA’s strong returns. FMSA has significantly outperformed the VanEck Vectors Oil Services ETF (OIH), which has generated ~15% returns in the past year.

The Energy Select Sector SPDR ETF (XLE), the broader energy industry ETF, has returned 15% during the same period. Fairmount Santrol has also outperformed the SPDR S&P 500 ETF (SPY), which has returned 19% during the same period. The Dow Jones Industrial Average (DJIA-INDEX) has risen 23% in the past year.

The following factors caused FMSA’s stock price to fall:

  • a lower number of rail cars in storage (in 4Q16, FMSA shipped over 70% of the northern white sand volumes by unit trains)
  • reduced rates from railcar renegotiations in 4Q16, as compared to 3Q16

What could drive FMSA in the future?

FMSA has reopened a number of idled facilities processing sand, and these will likely drive the company in the future. These facilities include:

  • the Maiden Rock facility, with an annual capacity of over 1.2 million tons
  • the Brewer facility, with an annual capacity of ~1.0 million tons
  • a coating facility in Illinois

Now let’s discuss Wall Street analysts’ targets for Fairmount Santrol.

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