Why U.S. Silica Holdings (SLCA) Plummeted on Friday

NEW YORK (TheStreet) -- U.S. Silica Holdings (SLCA) plummeted on Friday after announcing weaker-than-expected preliminary results for the fourth quarter ended December. By late afternoon, shares had taken off 8.1% to $29.43.

The mineral producer said it anticipates quarterly revenue of $149.5 million and net earnings of 31 cents a share. Analysts polled by Thomson Reuters had anticipated revenue of $151.2 million on 39 cents a share in net income.

"Our fourth-quarter results were negatively impacted by the severe winter storms in mid- and late December," explained CEO Byran Shinn in a statement. "The weather reduced well completion activity and drove higher costs across our supply chain. We also encountered meaningful one-time costs, including a bad debt expense related to a customer bankruptcy."

For full year 2014, adjusted EBITDA is expected between $180 million and $200 million, a result of expected growth in its oil and gas business. Consensus was for full-year 2014 EBITDA of $212.8 million.

Fourth-quarter and full-year results are due for release Feb. 25.

TheStreet Ratings team rates U S SILICA HOLDINGS INC as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate U S SILICA HOLDINGS INC (SLCA) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 24.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 57.69% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income increased by 13.5% when compared to the same quarter one year prior, going from $18.80 million to $21.33 million.
  • The debt-to-equity ratio of 1.30 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.49, which shows the ability to cover short-term cash needs.
  • Net operating cash flow has decreased to $18.36 million or 25.65% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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