Will C&J Energy Services’ Upcoming Results Give It a Shot in the Arm?

C&J Energy Services stock has appreciated 10% so far this year even though the company had delivered a weak forecast at the beginning of the year, but the good part is that the stock could sustain its momentum on the back of the recent uptick in oil prices.

C&J Energy will release its next set of results on May 7 for the first quarter of 2019. The company will have to beat Wall Street’s expectations and also issue a bright outlook to deliver more upside. Let’s see if it can do that given the improving oil price scenario.

The Headline Numbers 

C&J’s bottom line will swing to a loss of $0.42 per share in the first quarter of 2019 as compared to a profit $0.41 per share in the year-ago period.

According to Yahoo! Finance, C&J Energy’s revenue will drop 13.4% year over year to nearly $479 million. Its bottom line will swing to a loss of $0.42 per share in the first quarter of 2019 as compared to a profit $0.41 per share in the year-ago period.

The massive downswing in the bottom line will be a result of goodwill impairment and retirement of assets. For instance, in the fourth quarter of 2018, C&J Energy delivered a net loss of $189.5 million, which included a total of $167 million in goodwill impairment and loss on retirement of assets.

That’s because the weak oil pricing scenario at the end of last year forced C&J Energy to idle some of its assets. Oversupply in the oil industry led to a drop in drilling and completion activity as oil producers reduced their capital expenses.

This hurt C&J as it is in the business of well construction, completion, support, and other oilfield services. As oil prices have started picking up the pace in the past few months, there’s a good chance that oil producers might start loosening their purse strings once again.

A Lot Will Ride on the Outlook

C&J Energy’s outlook will play a critical role in ensuring that its shares keep rising. The good news for investors is that C&J expects a gradual uptick in its fortunes as the year progresses. According to C&J’s President and Chief Executive Officer, Don Gawick:

Looking to 2019, based on current customer feedback and improving commodity prices, we currently believe that our businesses should gradually improve from the fourth quarter lows.

But at the same time, there’s a lot of uncertainty about C&J’s business going forward because of the massive capex cuts announced by oil and gas companies in the wake of weakening oil prices.

For instance, oil producers in the Permian Basin are reportedly going to slash their capital expenses to the tune of 12% to 15% in 2019 as compared to 2018 levels or their prior expectations. Of course, oil prices have increased of late, but there’s a chance that producers will keep their budgets tight until and unless there are clear indicators that the oil price rally will be sustained in the future.

In case of yet another down cycle, oil producers won’t want to be burned like they were last year. As such, C&J Energy Services investors should keep a close eye on the company’s outlook before making a call on whether it is worth investing in or not.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects.

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