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These Factors Are Affecting Flotek Industries the Most

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FTK’s revenue growth by segment

Flotek Industries’ (FTK) Energy Chemistry Technology segment saw a 36% YoY (year-over-year) increase in revenues in 1Q17. Revenues from its Consumer and Industrial Chemistry Technologies segment remained nearly unchanged during the same period.

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Peer comparison

Schlumberger’s (SLB) revenues rose 6% YoY in 1Q17, while Fairmount Santrol Holdings’ (FMSA) revenues rose ~19% during the same period. From 1Q16 to 1Q17, Nabors Industries’ (NBR) revenues fell ~38%. You can read more about NBR in Market Realist’s series Does Nabors Industries’ Performance Mirror Its Confidence?

Operating income growth

The operating income for the Energy Chemistry Technology segment rose 6.3% YoY in 1Q17. The Consumer and Industrial Chemistry Technologies segment witnessed an 8.8% YoY operating income growth during the same period.

Meanwhile, competitive prices in commodity chemicals have kept Flotek’s CnF (complex nano-fluid) margins under pressure, while the company saw a 3% sequential rise in sales volume in CnF technology products in 1Q17 in the US.

What will drive FTK’s 2Q17 results?

Flotek Industries’ management has identified higher demand and related price hike to improve FTK’s financial performance in 2Q17.

In its 1Q17 conference call, Flotek CEO (chief executive officer) John Chisholm stated: “Second quarter here in 2017, we’re anticipating steady completion activity with opportunities for growth, continued demand in Energy Chemistry, with expanding margins as the result of strategic price increases, continued efficiency improvement and consistent growth to our Consumer and Industrial Chemistry Technologies sectors, as we continue to expect as we have long term to outperform the completion activity as defined by EIA DPR.”

Flotek Industries makes up 0.08% of the iShares S&P Small-Cap 600 Value ETF (IJS). Since March 31, 2017, IJS has fallen 36%, compared with FTK’s 30% decline.

Now let’s discuss the effect of rig count and upstream operators’ capital expenditure on FTK’s financial performance.

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