FTS International: Pumping Less Profits, Still Enough Profits

Feb. 11, 2019 9:39 PM ETFTS International, Inc. (FTSI)7 Comments

Summary

  • FTS International has been hit hard by the continued pressure on exploration budgets from E&P names.
  • Reality is that the company is rapidly deleveraging and appears to have a cost advantage compared to peers.
  • Despite profits collapsing, leverage ratios are very modest, the earnings yield remains compelling, and a turnaround might be around the corner.
  • Looking for a community to discuss ideas with? Value In Corporate Events features a chat room of like-minded investors sharing investing ideas and strategies. Start your free trial today »

FTS International (NYSE:FTSI) reported preliminary fourth-quarter results which were welcomed by investors after expectations for the operational performance have been truly depressed. I have long been attracted to FTS following its IPO and while the dip-buying might have been ill-timed and too early, I am still happy to hold onto a substantial long position which I have averaged down to $10.

This comes as the earnings yield remains compelling, potentially translating into even greater cash flow power in case oil prices might really show a recovery from here.

Soft End to 2018

FTS International announced that it sees fourth-quarter sales at $245-250 million. On these sales it sees EBITDA at $62-64 million and net earnings of $25-27 million. Cash flow conversion is better with fourth-quarter capital spending seen at just $16 million, while depreciation expenses come in at $22 million. The solid cash flow generation made that gross debt has been cut to $508 million by the end of the year, with net debt standing at $330 million.

The company exited the quarter with 19 active fleets, with average fleets coming in at 19.3 for the quarter, down from 21.8 in the third quarter. Market turmoil and correlated to that lower oil prices have been weighing on the results, as capital spending budgets of many E&P names have been exhausted towards the end of the year.

Soft Outlook

FTSI's CEO Michael Doss has indicated that higher oil price volatility has caused uncertainty for the outlook for frac demand in the first half of 2019, as E&P companies will prioritise capital spending, creating little visibility for the quarters to come.

On the bright side is the expectation that one or two additional fleets will be deployed in the first quarter. This good news, that of a sequential increase in activity levels, will not be

Please subscribe to Value In Corporate Events - Marketplace. Check out to obtain premium research on all the latest IPOs, M&A activity and other corporate events. Reviews of situations will be made upon request!

This article was written by

The Value Investor profile picture
22.96K Followers
Finding value that gets unlocked in M&A, IPOs and other corporate events
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

Disclosure: I am/we are long FTSI. 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.

Recommended For You

Comments (7)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.