Carbo Ceramics (CRR) Misses Q4 EPS by 23c, Revenues Beat

Carbo Ceramics (NYSE: CRR) reported Q4 EPS of ($0.76), $0.23 worse than the analyst estimate of ($0.53). Revenue for the quarter came in at $49.57 million versus the consensus estimate of $48.08 million.

Outlook

CEO Gary Kolstad commented on the outlook for CARBO stating, "Our transformation strategy is working. We are very pleased with the profitable growth in our Industrial and Environmental business sectors. The growth of these two sectors should result in a balanced portfolio that is less susceptible to swings in oil and gas commodity prices. We are also pleased with the oilfield technology products and services profitable growth, and expect to retain our leadership position in those products and services.

"In the Oilfield sector, E&P operators' focus on free cash flow, coupled with recent oil price volatility, creates a less than certain environment with regard to drilling and completion spend in 2019. Current expectations by some industry analysts are predicting 2019 drilling and completion spend to be down high single digits on a percentage basis compared to 2018. However, we are seeing positive signs internationally that should bode well for our oilfield sector products.

"The Industrial sectors provide a very large, multi-year growth opportunity for CARBO. In the mining sector, more companies have started increasing their operating and capital spend, which supports our CARBOGRIND product growth. In the foundry industry, the value our products bring to improve our client's end-product quality, along with the need to comply with OSHA Permissible Exposure Limits (PEL) silicosis regulations, supports our CARBOACCUCAST product growth. In both these sectors, and in numerous other Industrial sectors, our ceramic technology products are seeing market share growth.

"The Environmental sector continues to see growth, as companies in various industry sectors continue to be more environmentally conscious. This provides us with a multi-year growth opportunity, in which we will put a strong focus on growing at high rates in Industrial sectors.

"Based on the above and our expectations for profitable growth in the industrial and environmental sectors, and oilfield technology products, we anticipate our 2019 revenue to be similar to 2018 and lead to another year of significant EBITDA fall-through.

Oilfield Sector:

"We expect continued strong growth for our international ceramic technology sales in 2019. Demand for our technology continues to increase in South America, along with Europe, Africa and the Middle East. In North America, the opportunity set for our ceramic technology sales remains strong, with KRYPTOSPHERE HD projects currently weighted more to the second half of the year.

"On the fracture technology design and analysis front, demand for our STRATAGEN consultants, and our FRACPRO software, is expected to remain strong as our clients utilize these offerings to optimize their completion designs and return economics.

"At this time, we anticipate base ceramic sales and frac sand sales to decrease single digits on a percentage basis, similar to the lower industry expectations for drilling and completion spend. For base ceramics, we continue to drive business model changes towards production on demand, along with upfront cash commitments. For frac sand, a high percentage of our sand capacity is under contract, from which we are also benefiting from the use of our rail cars and distribution center.

Industrial Sector:

"We expect strong double digit growth in industrial revenues in 2019 through continued growth of our ceramic media in both the grinding and foundry markets. Our industrial ceramic client list is expanding globally, and should lead to improved market share for our technology products. We are also developing new markets while expanding the existing markets we sell into through a broader range of technology product offerings.

"Our PicOnyx Inc. investment is off to a great start. We recently initiated the first phase of the manufacturing process. M-Tone pigment should be in the market during the first half of 2019, and we expect production to ramp over the course of the year.

"CARBO has world class manufacturing expertise. This manufacturing expertise is used to develop solutions for our clients. There are a number of contract manufacturing opportunities in the queue. We expect to grow both in revenue, and by expanding the types of products we produce. Their benefit has the potential to be significant as these projects take idled assets and turn them from cash consumers to cash producers.

Environmental Sector:

"Growth in product sales and expanding our reach outside the oilfield should result in revenue growth for ASSETGUARD in 2019. We are increasing resources specifically dedicated to growing industrial and other end market sales. ASSETGUARD continues to lead the industry in developing technology products for our clients to address their ongoing challenges.

"Progress on our transformation strategy will continue in 2019 as we continue to focus on diversifying our revenue streams, maximizing profitability across the businesses, and maintaining healthy cash levels. We expect to be cash neutral in 2019, excluding planned debt repayments," Mr. Kolstad concluded.

For earnings history and earnings-related data on Carbo Ceramics (CRR) click here.

You May Also Be Interested In

• Jefferies sees a buying opportunity in this S&P 500 sector
• Range Impact, Inc. (RNGE) Reports Q2 Loss of $0.02
• Pulmatrix (PULM) Reports Q2 Loss of $0.29