Liberto, Inc. (NYSE: LBRT) reported Q3 EPS of $0.49, $0.07 worse than the analyst estimate of $0.56. Revenue for the quarter came in at $559 million versus the consensus estimate of $592.49 million.

Outlook

Working in concert with customers, Liberty continues to drive innovation and operational efficiency across the entire fleet. This performance translates to strong demand for Liberty’s high efficiency fleets that deliver differential frac services. Premium service quality, coupled with basin and customer diversity, positions the Company to believe that it will continue to generate strong returns on capital employed regardless of how the market unfolds in the next few quarters. Liberty was built for long-term success as illustrated by the trailing 12-months Pre-Tax Return on Capital Employed (“ROCE”)3 of 43%.

Liberty’s geographically diversified operations continue to be in high demand and our long-term partnership strategy allows us to work closely with customers to make the most efficient use of our assets and expertise, to lower our customers' cost of production. During the third quarter additional local sand volumes continued to come on-line driving down well costs for our customers. We have ramped up to pumping over 70% local sand in the Permian Basin currently.

The projections that we included in our second quarter press release for annualized Adjusted EBITDA per average active fleet were based on a flat pricing environment. The frac pricing environment has been weakening modestly in the second half of 2018 as pressure pumping supply that was built for expected Permian completions growth outstripped the flattening completions growth curve. In a normal year, fourth quarter revenue typically declines mid-single digits compared to summer quarters due to the holiday season and budget management by producers. Current indications for the fourth quarter suggest that this is not an unreasonable expectation for this year.

With a supportive macro commodity environment and the projected increase in takeaway capacity coming on-line in major basins, we would expect the supply and demand balance to tighten and pricing to strengthen in the second half of 2019. Demand for dedicated, efficient fleets looks to be strong in 2019.

Mr. Wright added, “Our third quarter results were strong with annualized Adjusted EBITDA per average active fleet of $21.2 million. We managed through some significant scheduling issues with our customers completion plans in the third quarter, as reality tends to bring scheduling challenges that are not always avoidable. We previewed in our second quarter earnings release that throughput was going to be lower in the third quarter than our record second quarter, due to customer completion scheduling. We also experienced slight weakening in pricing in the southern region due to supply/demand imbalance created by the temporary slowdown in the Permian completion growth trajectory.”

“Liberty’s strong financial results, favorable outlook and strong balance sheet, support our balanced strategy of growth and returning capital to our stockholders. Liberty is committed to creating long-term stockholder value via compounding shareholder value by reinvesting cash flow at high rates of return and returning cash to shareholders as appropriate. We are excited by the growth opportunities in front of us and the positive long-term outlook for the shale revolution and the benefits that this brings to our industry and the country as a whole,” concluded Mr. Wright.

For earnings history and earnings-related data on Liberto, Inc. (LBRT) click here.