Why USA Compression Partners (USAC) Stock Is Tumbling Today

NEW YORK (TheStreet) -- USA Compression Partners (USAC) stock is lower on Wednesday after the company announced its public offering of 6.6 million shares of common stock, of which 1 million is being offered by unitholders. The Austin, Texas-based will offer the stock at $25.59 per share. Underwriters have been granted a 30-day option to purchase up to an additional 990,000 shares. 

By late morning, shares had tumbled 6.8% to $24.96.

Net proceeds of the offering, scheduled to close May 19, will total around $137.9 million. In a statement, the company said it would use proceeds to "reduce the indebtedness outstanding under its revolving credit facility and for general partnership purposes." USA Compression will not receive proceeds sold by unitholders. 

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Wells Fargo, Barclays, Goldman Sachs, JPMorgan and UBS will act as joint book-running managers, while Raymond James, RBC Capital Markets, Regions Securities and Scotia Capital will act as co-managers. 

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TheStreet Ratings team rates USA COMPRESSION PRTNRS LP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate USA COMPRESSION PRTNRS LP (USAC) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its poor profit margins."

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

  • The gross profit margin for USA COMPRESSION PRTNRS LP is rather high; currently it is at 64.71%. Regardless of USAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.79% trails the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • USA COMPRESSION PRTNRS LP has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, USA COMPRESSION PRTNRS LP increased its bottom line by earning $0.32 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.57 versus $0.32).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Energy Equipment & Services industry average. The net income increased by 55.3% when compared to the same quarter one year prior, rising from $2.52 million to $3.92 million.
  • USAC's very impressive revenue growth greatly exceeded the industry average of 10.6%. Since the same quarter one year prior, revenues leaped by 54.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

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