CARBO is the world's largest supplier of ceramic proppant for fracturing oil and gas wells. With natural gas prices in the dumps, its customers have been moving towards oily, liquid-rich plays especially in the major shale areas in North America.
Revenue Jumped 33% in the Fourth Quarter
On Jan 27, CARBO reported its fourth quarter results and blew by the Zacks Consensus Estimate by 17%. Earnings per share were 91 cents compared to the consensus of 78 cents.
Revenue climbed $29.5 million to $119.6 million. Proppant sales volume rose 20% to 332 million pounds. Breaking it down by geographic segment, proppant sales volume rose 17% in North America (excluding Mexico) and 37% in the international segment compared to the fourth quarter of 2009.
"Exiting the third quarter, we witnessed continued momentum in proppant sales," said President and CEO Gary Kolstad.
"The up tick in horizontal fracturing in oil bearing reservoirs, coupled with our traditionally strong footprint in gas driven plays, caused sales volume resilience in a quarter that historically shows seasonal weakness," he added.
The company started operations on the third 250 pound production line at the Toomsboro, Georgia facility. It will be completing that line and completing the fourth line by the end of 2011.
The Outlook for 2011 Looks Bright
The company is bullish about 2011 as industry activity levels remain high even though natural gas prices are low. CARBO continues to see a shift in activity to oily, liquid-rich plays which is where its proppant comes into play.
It is ramping up production at several of its facilities. CARBO started site preparation for a second resin coating line at its New Iberia facility which will increase resin coating capacity to 400 million pounds annually from the current capacity of 100 million.
Zacks Consensus Estimates Move Higher
Not surprisingly given the solid quarter, Zacks Consensus Estimates have moved sharply higher since the earnings announcement.
The 2011 Zacks Consensus Estimate jumped 14 cents to $4.20 per share. That is earnings growth of 22.5% compared to 2010, which was already a record year.
The party is expected to continue into 2012 with the Zacks Consensus rising to $5.33 from $4.96 in the last week, as 4 estimates moved higher and 1 lower in that time.
That is another 27% earnings growth.
Valuations In Line With Peers
CARBO is not a cheap stock. It is trading at 27x forward estimates which is much more expensive than the S&P 500 at 14x.
However, its peers are also trading at 27x so it is in line with their valuations.
Shares At 10-Year Highs
Shares have been in a strong rally for the last 2 years and the recent earnings results have pushed shares to yet another 10 year high.
This Week's Momentum Zacks Rank Buy Stocks
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
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