KLR Group Cuts Price Target on U.S. Silica (SLCA) to $17; Says Likely Best Positioned in a Challenged Group

KLR Group reiterated a Hold rating on U.S. Silica Holdings (NYSE: SLCA), and cut the price target to $17.00 (from $20.00), following the company's 4Q. SLCA reported EPS of ($0.26), missing consensus of ($0.17). KLR says SLCA is likely the best positioned among a challenged group, and may benefit from low cost production sources and a superior logistics network. However, the volume recovery needed to provide sufficient operating leverage may not bee seen until 2017.

Analyst Darren Gacicia commented, "Low utilization and high fixed costs challenge the proppant industry, whose capacity is on a scale to service a much higher rig count. SLCA is likely best positioned among a challenged group. SLCA may benefit from low cost production sources and a superior logistics network, but we do not see the volume recovery needed to provide sufficient operating leverage until 2017. A faster shutting of industry capacity may improve our outlook, but remains a potential overhang, depending on the speed and ease of reactivation. A SLCA-led consolidation of the group may prove positive as well. For now, we see other oilfield services sub-sectors with beta to recovery and better risk/reward relative to our mid-cycle valuation, as upstream activity turns in 2016/2017. We look to get more aggressive on SLCA shares when we have a better sense when capacity utilization may hit a bullish tipping point (>80%+) and pricing power becomes more favorable."

For an analyst ratings summary and ratings history on U.S. Silica Holdings click here. For more ratings news on U.S. Silica Holdings click here.

Shares of U.S. Silica Holdings closed at $16.49 yesterday.

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