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JPMorgan Cuts ProFrac's Earnings Forecast On Lower Reinvestment And Industry Attrition
ACDCProFrac (ACDC) Benzinga·2025-03-17 17:51

Core Viewpoint - JP Morgan analyst Arun Jayaram maintains an Underweight rating on ProFrac Holding Corp. (ACDC) with a price target of 7,followingdisappointingfourth−quarterresultsthatmissedsalesexpectationsandreportedasignificantnetloss[1].FinancialPerformance−ACDCreportedfourth−quartersalesof7, following disappointing fourth-quarter results that missed sales expectations and reported a significant net loss [1]. Financial Performance - ACDC reported fourth-quarter sales of 454.7 million, falling short of the consensus estimate of 479.3million,andrecordedanetlossof479.3 million, and recorded a net loss of 105.0 million compared to a loss of 45.2millioninthesamequarterlastyear[1].−TheresultswereimpactedbymissesinEBITDAandfreecashflow(FCF)attributedtoseasonalityandaweakermacroeconomicenvironment[1].OperationalInsights−ManagementnotedanincreaseinACDC′sactivefleetcount,reachingitshighestlevelsincemid−2024,withsixadditionalfleetssecuredsincethefourth−quarterlowpoint[2].−ThecompanyexpectsloweraveragepricingtoslightlyoffsetmodestlyhigheractivityinStimulationServicesyear−over−year[2].−Continuedindustry−wideequipmentattritionisanticipatedduetohigherhourspumpedperfleetandlowerreinvestmentlevels[2].FutureProjections−Theanalystestimatesanaverageof29.3fleetsinthefirstquarterof2025,leadingtoStimulationServicesEBITDAofapproximately45.2 million in the same quarter last year [1]. - The results were impacted by misses in EBITDA and free cash flow (FCF) attributed to seasonality and a weaker macroeconomic environment [1]. Operational Insights - Management noted an increase in ACDC's active fleet count, reaching its highest level since mid-2024, with six additional fleets secured since the fourth-quarter low point [2]. - The company expects lower average pricing to slightly offset modestly higher activity in Stimulation Services year-over-year [2]. - Continued industry-wide equipment attrition is anticipated due to higher hours pumped per fleet and lower reinvestment levels [2]. Future Projections - The analyst estimates an average of 29.3 fleets in the first quarter of 2025, leading to Stimulation Services EBITDA of approximately 80 million [3]. - Profitability is expected to improve as utilization increases across business units throughout the year, albeit at a slower pace [3]. - Revised EBITDA forecasts for 2025 and 2026 are 472millionand472 million and 588 million, down from previous estimates of 543millionand543 million and 680 million, respectively [3]. Cash Flow and Capital Expenditure - Projected FCF generation for 2025 and 2026 is 78millionand78 million and 184 million, respectively, with capital expenditures estimated at 340millionand340 million and 447 million for the same periods [4]. - Investors can gain exposure to ACDC through the Invesco Oil & Gas Services ETF (PXJ) [4]. Stock Performance - ACDC shares are down 1.65%, trading at $7.15 as of the last check on Monday [4].