Seeking Alpha
Long/short equity, growth at reasonable price, research analyst, deep value
Profile| Send Message|
( followers)

Summary

  • C&J Energy Services reported Q214 earnings.
  • Earnings report validates that aggressive growth was prudent.
  • Margins were anticipated to be an issue, but provide for an opportunity to gain going forward.

After the close yesterday, C&J Energy Services (NYSE:CJES) reported Q214 earnings that easily surpassed estimates. Revenue of $367.9 million surged past estimates of $339 million and jumped 16% sequentially from the prior quarter. The big rub with investors and analysts on the earnings call is that margins aren't expanding to match the revenue growth. For that part, earnings of $0.28 beat estimates by $0.02.

The company continues to aggressively add hydraulic fracturing horsepower with 20,000 horsepower added in April and another 40,000 horsepower in July. An additional 40,000 horsepower is being added with the equipment already fully booked. In addition, C&J Energy Services bought Tiger Cased Hole Services that focuses on the wireline services on the West Coast. Combined with the deal to purchase Nabors (NYSE:NBR) completion and production services, the business is moving full speed ahead to take advantage of the expanding oilfield services sector.

The previous article anticipated that the fast growth would pressure margins while providing for market share gains. The stock is plunging over 10% due to an overall weak market and over reaction to the margin concerns. C&J Energy Services is positioned perfectly to take advantage of the growth opportunities presented by the service intensity growth in domestic hydraulic fracturing demand. The market is over obsessing on margins at this point and missing the growth potential of this company.

Disclosure: The author is long CJES. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

Source: Update: C&J Energy Services Q2 '14 Earnings