"It disappoints us to conclude that frac sand demand potential cannot offset execution concerns," wrote the analysts in the report.
As such, 2014 EPS was lowered to $1.85 from $2.35, and 2015 EPS was cut to $2.30 from $3.
"We sense management's optimism has faded regarding improving its distributed cost position into the Permian before the start-up of its LaSalle, IL plant in 2Q14," the analysts wrote. "The company faces rail-related issues diverting product from ND (Bakken) to TX (Permian) where larger customers continue to exceed their contractual allotments."
"We believe the strategies of working with larger service providers and expanding distribution capability may be less helpful/differentiating than originally anticipated. We had thought the relationships might yield pricing adjustments for shipment to different basins (to allow for varying distribution cost), but instead we sense that SLCA is no less vulnerable to prevailing 'basin pricing'," they continued.
On Friday, the specialty mineral producer announced weaker-than-expected preliminary results for the fourth quarter ended December. Management said it anticipates quarterly net earnings of 31 cents a share on revenue of $149.5 million. Analysts surveyed by Thomson Reuters had anticipated earnings of 39 cents a share on $151.2 million in revenue.
"Our fourth-quarter results were negatively impacted by the severe winter storms in mid- and late December," said CEO Bryan 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."