A month has gone by since the last earnings report for USA Compression Partners (USAC). Shares have added about 2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is USA Compression due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

USA Compression Q2 Earnings & Revenues Top Estimates

USA Compression Partners reported a second-quarter adjusted net profit of 21 cents per common unit, which beat the Zacks Consensus Estimate of 17 cents due to its improved pricing and utilization. The metric also improved significantly from the year-ago quarter's adjusted net profit of 8 cents per share on the back of a higher-than-expected, revenue-generating capacity.

The largest independent provider of natural gas compression services generated revenues of $235.3 million, improving 13.7% from the year-ago quarter’s level and beating the Zacks Consensus Estimate of $233 million. This revenue growth was propelled by a 13.5% year-over-year increase in Contract operations and a notable 42.1% surge in Parts and Service revenues.

Adjusted EBITDA increased 14.9% to $143.7 million and came ahead of our estimate of $134.6 million.

Distributable cash flow increased from $67 million in the prior-year quarter to $85.9 million. The company reported a net income worth $31.2 million compared with $23.6 million a year ago.

USAC reported operating cash flow of $96.7 million in the second quarter, up from the prior-year quarter’s $87.9 million.

Adjusted gross operating margin of 66.8% marked an increase from the year-ago period’s 66.2%.

The company’s revenue-generating capacity increased 6.2% year over year to 3.5 million horsepower, surpassing the Zacks Consensus Estimate by 0.1%. The figure came in above our estimate of 3.44 million horsepower.

Further, the average monthly revenue per horsepower rose to $20.29 from $18.65 in the second quarter of 2023. The actual figure was slightly below our estimate of $20.36.

Meanwhile, USA Compression’s average quarterly horsepower utilization rate came in at 94.7%, up from 93.4% a year ago.

DCF, Cost, Capex & Balance Sheet

USAC’s distributable cash flow available to limited partners totaled $85.9 million (providing 1.4X distribution coverage), up 28.1% from the year-ago level.

Notably, on Jul 11, USAC declared second-quarter cash distribution of 52.5 cents per unit ($2.10 on an annualized basis). The distribution was paid on Aug 2, 2024, to common unitholders of record as of Jul 22.

The company reported $157.9 million in costs and expenses, down 2.7% from the year-ago quarter’s $162.4 million. It spent $67 million on growth capex. Maintenance capex amounted to $8.9 million.

As of Jun 30, 2024, USA Compression had a net long-term debt of $2.5 billion.

Guidance

USA Compression has increased its financial projections for 2024. The company now expects net income to range between $105 million and $125 million, up from the previous estimate of $95 million to $115 million.

Adjusted EBITDA is also projected to be higher, with a new range of $565 million to $585 million, compared to the prior outlook of $555 million to $575 million.

Furthermore, the company's management has also raised the expected distributable cash flow for 2024 to a range of $345 million to $365 million, an increase from the previous estimate of $340 million to $360 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, USA Compression has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, USA Compression has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

USA Compression is part of the Zacks Oil and Gas - Mechanical and and Equipment industry. Over the past month, Dril-Quip (DRQ), a stock from the same industry, has gained 5.5%. The company reported its results for the quarter ended June 2024 more than a month ago.

Dril-Quip reported revenues of $120.34 million in the last reported quarter, representing a year-over-year change of +34.3%. EPS of $0.10 for the same period compares with -$0.03 a year ago.

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