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Hi-Crush: Sky-High Expectations Create A Great Buying Opportunity

Nov. 02, 2017 3:31 PM ETHi-Crush Inc. (HCRSQ)104 Comments
Trent Welsh profile picture
Trent Welsh


  • The market isn't happy with the company's outstanding performance on almost every metric that matters.
  • Kermit plant's strategic advantage could be huge in Q4, along with the new Pecos terminal.
  • PropStream is a future growth driver for the company.
  • Distribution growth, unit buybacks, and CapEx considerations.

Hi-Crush Partners LP (HCLP) did a great job on improving performance on pretty much every key metric that investors look at for the company. Almost all of these numbers look to improve in the following quarter as the company starts to fully realize the Kermit plant's strategic advantages. The company's PropStream crews look to add growth and value added services to the company's customers other sand companies cannot match. The market can only ignore the upside potential of this stock so long as distributions grow, the company acts on opportunistic unit buybacks, and CapEx shrinks next year freeing up additional distributable cash as shareholder returns take the forefront of consideration in 2018.

Here is a table showing just how well the company performed over the last quarter, according to its Q3 2017 earnings call:

Hi-Crush Q2 Q3 Growth
Sand Volume (Million Tons) 2.1 2.5 19%
Sand Price per Ton $64 $68 6.3%
Revenues (Millions) $135 $168 24%
Adjusted EBITDA (Millions) $26.5 $41.7 57%
Contribution Margin (Per Ton) $16.73 $19.39 16%
Distributable Cash Flow (Millions) $22.9 $37.5 64%

Table by Trent Welsh

The market was not ecstatic about these results as expectations were sky high, even though the stock is still trading at about an 85% discount to its 2014 highs. Also, look at how it is comparing to Emerge Energy Services (EMES) after that company beat easy estimates though it underperformed Hi-Crush in many areas and didn't even initiate a distribution.

ChartHCLP Price data by YCharts

Hi-Crush is gaining a strategic advantage from its near full utilization of its now fully operational Kermit facility in the Permian Basin. Here is what the facility and the new Pecos terminal look to bring to the table in Q4 as the first mover in the Permian Basin:

  • Improving utilization

This article was written by

Trent Welsh profile picture
B.S. Psychology University of Missouri-Columbia MBA University of Missouri-Columbia Full time investor looking to capitalize on market overreactions and looking for value where others see nothing but wreckage. Long term buys and short term trades to build wealth.Investing Better Than A Money Manager: The Rise Of Retail Investing - By Trent WelshI have an investing book with the title above on Amazon written for beginning retail investors looking to set up a self-directed portfolio with their IRA's, 401k's, or other retirement or trading accounts. It details how to pick and choose stocks amidst the different sectors and how to figure out how much in each sector an investor should have to help achieve diversification.Please take a look at it and let me know your thoughts. Thanks and Best of luck to all :).

Analyst’s Disclosure: I am/we are long HCLP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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