RPC Beat 2Q16 Earnings Estimates: Was It the Robust Service?



RPC’s 2Q16 revenue

RPC (RES) released its fiscal 2Q16 financial results on July 27, 2016. The company recorded total revenue of ~$143 million, a decline of 52% from ~$297.5 million in fiscal 2Q15. The decline was mostly due to the slowdown in North American drilling operations and pricing pressures on RPC’s services.

Compared to fiscal 1Q16, RPC’s revenues decreased ~24%. In comparison, fiscal 1Q16 revenue for Dril-Quip (DRQ), RPC’s smaller market cap peer, declined 26% year-over-year.

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RPC’s 2Q16 earnings

RPC’s fiscal 2Q16 adjusted net loss per share was $0.23. That beat the consensus sell-side analysts’ earnings estimate of -$0.24. Despite weak upstream drilling activity and lower pricing, robust service intensity helped RPC’s earnings exceed analysts’ estimates.

Compared to fiscal 2Q15, RPC’s adjusted loss fell further in fiscal 2Q16. On average, adjusted EPS (earnings per share) has fallen short of consensus EPS by ~15% in the past 13 quarters.

RPC makes up 14.9% of the iShares US Oil Equipment & Services ETF (IEZ). The oil and gas equipment and services industry makes up 78% of IEZ.

What affected RPC’s reported earnings in fiscal 2Q16?

In fiscal 2Q16, RPC’s reported net loss was ~$48.7 million, a deterioration from fiscal 2Q15 when it reported $34 million in net loss. Compared to fiscal 1Q16, net loss declined 50% further. RPC’s fiscal 2Q16 net income declined mostly due to the following:

  • inefficiencies resulting from lower drilling activity
  • lower prices for RPC’s services

Factors that positively affected RPC’s bottom line

  • headcount reduction and lower incentive compensation
  • lower interest expense following zero syndicated credit facility for RPC in 2Q16

Next, we’ll take a look at RPC’s growth drivers.


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