Dril-Quip versus peers and industry
Dril-Quip (DRQ) is an oilfield equipment and services (or OFS) company. It primarily supplies engineered offshore drilling and production equipment. On May 9, Dril-Quip was trading at $59.44, which is nearly unchanged from its price at the beginning of 2016.
The VanEck Vectors Oil Services ETF (OIH), an ETF tracking the index of 25 OFS companies, has remained unchanged since the beginning of the year. Baker Hughes (BHI), DRQ’s larger market cap peer, has fallen 6% during the same period. The entire OFS industry has been negatively affected by the energy price crash since June 2014.
What does Dril-Quip’s share price movement tell us?
Dril-Quip’s share price trended down from May 2015 until February 2016 before steadying out in the past three months. DRQ’s quarterly revenues and earnings deteriorated in the past four quarters due to energy price depression and weak demand for OFS products and services. However, its cash flows from operations showed some degree of resilience.
Dril-Quip’s moving averages
On May 9, Dril-Quip’s share price was at a 0.3% discount to its 50-day moving average (or DMA). It’s trading 0.8% below its 200-day moving average. DRQ makes up 2.0% of the iShares US Oil Equipment & Services (IEZ). The OFS industry makes up 78% of IEZ.
A 50 DMA is a short-term moving average (or MA) while a 200 DMA shows a long-term trend. DRQ’s short-run MA has kept close to its long-run MA since the third week of April. This indicates that DRQ’s share price is gathering strength. However, DRQ’s share price ran ahead of its short-run MA in March and has mostly stayed above it since then, which also indicates relative strength in DRQ’s share price. However, there could be some headwinds ahead.
We’ll discuss Dril-Quip’s top-line and bottom-line growth, its balance sheet, and its valuation multiples in this series. We’ll start by looking at management comments in the next part.