It has been about a month since the last earnings report for Liberty Oilfield Services (LBRT). Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Liberty Oilfield Services due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Liberty Energy Q3 Earnings & Revenues Miss Estimates, Decline Y/Y
Liberty Energy reported a third-quarter 2024 adjusted net income of 45 cents per share, which missed the Zacks Consensus Estimate of 55 cents. This was primarily due to poor equipment and services' execution, and lower activity in the reported quarter. Additionally, the bottom line declined from the year-ago quarter’s reported figure of 86 cents due to a year-over-year increase in costs and expenses.
The Denver, CO-based oil and gas equipment company's revenues totaled $1.14 billion, which missed the Zacks Consensus Estimate by 0.2%. The top line was 6.6% below the prior-year quarter’s $1.22 billion.
The company’s adjusted EBITDA was $247.8 million compared with $319.2 million in the year-ago quarter. The figure also missed our projection of $255.9 million.
Ahead of the earnings release, Liberty’s board of directors announced a dividend of 8 cents per common share payable on Dec. 20 to its stockholders of record as of Dec. 6. This dividend represents a 14% increase from the prior regular quarterly dividend of 7 cents per share.
In the quarter, Liberty returned $51 million to its shareholders through a combination of share repurchases and cash dividends.
Liberty repurchased and retired 1,939,072 shares of Class A common stock at an average price of $20.27 per share, representing 1.2% of the total shares outstanding in the quarter ending Sept. 30. The buyback totaled approximately $39 million. Since the program's commencement on July 25, 2022, LBRT has cumulatively repurchased and retired 14.3% of the shares outstanding at that time. The company has around $323 million remaining under its authorization for future share repurchases.
Liberty Energy's multi-year fleet technology transition is on track, aiming to begin 2025 with 90% of its fleets primarily powered by natural gas. LBRT’s digiPrime fleet set a new company record by completing the highest number of monthly pumping hours in its history. The company achieved a quarterly record for pumping efficiency in the quarter and shipped a fleet to Australia, where completion activity is set to begin during the fourth quarter.
Costs and Expenses
Liberty reported total costs and expenses of $1031.3 million in the third quarter, increasing 2% from the year-ago quarter. The figure was also higher than our projection of $1015.8 million.
Balance Sheet & Capital Expenditure
As of Sept. 30, Liberty had approximately $23 million in cash and cash equivalents. The pressure pumper’s long-term debt of $123 million represented a debt-to-capitalization of 5.9%. Further, the company’s liquidity, cash balance and revolving credit facility, amounted to $352 million.
In the reported quarter, LBRT spent $162.8 million in its capital program, higher than our projection of $136.6 million.
Guidance
The company projects a tax expense rate of approximately 23% to 24% of pre-tax income for 2024. LBRT also anticipates that cash taxes will be around 50% of its effective book tax rate for the year.
In the fourth quarter, capital expenditures are expected to total about $200 million, reflecting the anticipated timing of deliveries for digiTechnologies, the completion of dual fuel technology upgrades and demand for wet sand handling equipment.
Looking ahead, the company plans to increasingly focus its investments on expanding opportunities in power generation services.
While significant uncertainty is expected to persist in global oil markets, driven by OPEC+ production decisions, economic growth in China and geopolitical dynamics in the Middle East, global oil demand is projected to grow by approximately one million barrels per day this year with further increases anticipated next year. Despite a potential surplus in global oil production in 2025, the company expects oil prices to remain stable, supporting activity levels in North America.
The commissioning of new LNG export facilities in the United States and Canada is also anticipated to stimulate gas activity in 2025, contributing to sustained demand.
LBRT anticipates a slowdown in the frac market as E&P operators adjust its 2024 development programs, partly due to efficiency gains achieved in the first half of the year. Factors such as consolidation, longer laterals and a focus on high-graded acreage have driven these efficiencies. The elevated uncertainty across the energy sector has made operators hesitant to ramp up completions activity before the new year.
As a result, the company now expects a low double-digit percentage reduction in fourth-quarter activity, slightly higher than the typical year-end decline. However, Liberty anticipates a rebound in completions activity in early 2025 as E&P operators work to maintain steady production levels.
Overall, LBRT plans to maintain a disciplined approach to investment and asset deployment, aiming to achieve strong long-term financial results. Although recent reductions in customer activity have led to a modest decline in the company’s deployed fleet count, Liberty remains committed to supporting its long-term partners. Looking forward, LBRT expects healthy free cash flow generation in 2025 with a strategic focus on power generation services. This balanced approach positions the company well for growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -61.05% due to these changes.
VGM Scores
At this time, Liberty Oilfield Services has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Liberty Oilfield Services has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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