Archrock Inc. (AROC) Q1 2024 Earnings: Surpasses Analyst Revenue Forecasts

GuruFocus Research

1 May 2024 at 7:35 am·3-min read

Net Income: Reported at $40.5 million for Q1 2024, surpassing the estimated $35.01 million.
Revenue: Totalled $268.5 million in Q1 2024, exceeding the forecast of $260.51 million.
Earnings Per Share (EPS): Achieved $0.26, exceeding the expected $0.22.
Contract Operations Revenue: Increased by 19% year-over-year to $223.1 million in Q1 2024.
Aftermarket Services Revenue: Grew to $45.4 million in Q1 2024, up from $42.1 million in the same quarter the previous year.
Dividend: Declared a quarterly dividend of $0.165 per share, with a dividend coverage ratio of 3.2x in Q1 2024.
Share Repurchase: Repurchased 82,972 common shares at an average price of $14.83 per share during Q1 2024.

Warning! GuruFocus has detected 10 Warning Signs with AROC.

On May 1, 2024, Archrock Inc. (NYSE:AROC) released its 8-K filing, detailing a robust performance for the first quarter of 2024. The company reported a net income of $40.5 million, significantly higher than the $35.01 million estimated by analysts. This performance marks a substantial improvement over the first quarter of 2023, which saw a net income of $16.5 million.

Company Overview

Archrock Inc. is a leader in the energy infrastructure sector, focusing primarily on midstream natural gas compression. It operates through two main segments: Contract Operations and Aftermarket Services. The company is renowned for its comprehensive solutions that include the design, installation, operation, and maintenance of natural gas compression equipment, generating the majority of its revenue from the Contract Operations segment.

Financial Performance Highlights

The first quarter of 2024 saw Archrock generating $268.49 million in total revenue, a notable increase from the $260.51 million forecasted by analysts. This growth is attributed to a 19% increase in the Contract Operations segment revenue, which totaled $223.1 million, up from $187.7 million in the same quarter the previous year. The Aftermarket Services segment also showed a healthy performance, with revenue rising to $45.4 million from $42.1 million year-over-year.

Gross margin percentages for the quarter were impressive, with the Contract Operations and Aftermarket Services segments recording 65% and 23%, respectively. These figures represent significant improvements from the previous year, underscoring Archrock's enhanced operational efficiency and strategic capital discipline.

Strategic Financial Management

Archrock's balance sheet remains robust, with long-term debt standing at $1.6 billion as of March 31, 2024, and a leverage ratio of 3.2x, improved from 4.1x a year earlier. The company's liquidity position is strong, with $477.7 million available, providing substantial financial flexibility.

The company also demonstrated its commitment to shareholder returns, declaring a quarterly dividend of $0.165 per share, which is covered 3.2 times by its earnings. Additionally, Archrock has actively repurchased shares, buying back 82,972 common shares during the quarter at an average price of $14.83 per share.

Management Commentary

"Momentum in Archrocks earnings power is carrying into 2024, reflecting our excellent operating execution, high-quality asset base, and innovative processes and technology," stated Brad Childers, President and CEO of Archrock. He also highlighted the positive outlook for the remainder of the year, driven by strong oil prices and sustainable compression demand in key markets like the Permian Basin.

Outlook and Guidance

Encouraged by the strong first-quarter results, Archrock has raised its full-year 2024 guidance for Adjusted EBITDA to between $510 million and $540 million. The company expects continued high levels of utilization and profitability, supported by a favorable macro environment and disciplined capital management.

Overall, Archrock's first-quarter results not only surpassed analyst expectations but also positioned the company for sustained growth in 2024. With a strong financial base, strategic investments in its fleet, and a focus on high-return opportunities, Archrock continues to strengthen its market leadership in the natural gas compression sector.

For more detailed information on Archrock's financial performance and future outlook, investors and interested parties are encouraged to view the full earnings report and listen to the upcoming conference call.

Explore the complete 8-K earnings release (here) from Archrock Inc for further details.

This article first appeared on GuruFocus.

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