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Why Emerge Energy Services LP Is Slumping Today

By Matthew DiLallo - Aug 1, 2018 at 11:31AM

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The frack sand producer had some disappointing news.

What happened

Emerge Energy Services LP (NYSE: EMES) sold-off on Wednesday, falling more than 13% by 10:15 a.m. EDT after reporting disappointing second-quarter results and revealing that it would not pay a cash distribution for the quarter.

So what

While Emerge Energy Services' volumes increased 6% sequentially to 1.59 million tons of sand, it "experienced a minor slowdown to finish the second quarter, and the softness has partially continued into [the] early third quarter," according to comments by Ted Beneski, the Chairman of the Board. Because of that, the company's net income only came in at $9.4 million, or $0.30 per unit, for the quarter, which missed analysts' expectations by $0.07 per unit. Meanwhile, revenue declined from $106.8 million in the first quarter to $101.8 million due to a decrease in higher priced sales volumes.

Sand mining at night.

Image source: Getty Images.

In addition to that, the company noted that it experienced a construction delay at its San Antonio facility. Because of that and the demand slowdown, Emerge Energy Services is reducing its guidance for the full year. It now sees adjusted EBITDA of $110 million (down from $120 million) and net income of $50 million (down from $60 million). Further, the company said that it would not pay a distribution once again this quarter.

Now what

Emerge Energy Services can't seem to compete with rival frack sand producers. U.S Silica (SLCA 2.02%), for example, recently reported a 16% sequential revenue increase on a 9% improvement in volumes. Meanwhile, Hi-Crush Partners (HCRS.Q) also posted higher revenue thanks to record volumes, which jumped 16% sequentially. Because of that, both companies are returning more cash to investors, with U.S. Silica announcing a $200 million buyback while Hi-Crush announced a big-time distribution boost. Those factors make them much better options for investors to consider if they're seeking a top stock to buy.

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Stocks Mentioned

U.S. Silica Holdings, Inc. Stock Quote
U.S. Silica Holdings, Inc.
$18.16 (2.02%) $0.36
Hi-Crush Inc. Stock Quote
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