US Silica Holdings: Zacks’ Bear of the Day Play

The recent downtrend has been brutal for stocks in the fracking and broader energy industry. We have seen several companies lose their status as profitable companies, while others appear to be on the brink of not even surviving this difficult time.

But beyond the fracking and energy space, there have been plenty of other companies that are tangentially related to the sector and have also been dragged down by this sluggish oil price trend. And while many have managed to weather the storm and are looking more promising now that oil has stabilized, the same cannot be said for US Silica Holdings (SLCASnapshot Report) which could still be in trouble.

US Silica in Focus

SLCA is a Maryland-based producer and seller of commercial silica (more or less sand) which is used in a variety of industrial applications as well as an oil & gas proppant. As you might guess given the crash in oil prices, the demand for these proppants has crumbled putting SLCA in a very difficult position.

In fact, in data from the most recent earnings report, sales for this segment have fallen 24%, while the average selling price per ton has lost 10% and the tons sold has fallen by over double digits quarter-over-quarter as well.  And with little hope of a return to triple digit oil prices in the near term, it isn’t looking very promising for SLCA right now.

So while SLCA may be up big so far in 2015, let’s remember that is still down significantly from a one year look. And with its recent earnings report there is plenty of reason to believe that a return to painful trading is ahead for SLCA once more.

Recent Earnings & Estimates

At the end of April, SLCA reported earnings of just 39 cents a share, a miss of four cents a share which translates into a nearly 10% miss. This is actually the first such miss since February 2014, but the outlook continues to tumble suggesting that this could be the start of another round of SLCA problems.

Consider how analysts have been slashing recent estimates for SLCA and their upcoming earnings. In fact, 90 days ago the full year earnings estimate was $2.50/share but this has fallen to just $1.02/share today including a most recent consensus of juts $0.88/share.

This marks an earnings contraction of over 50% when compared to the previous year, while we are seeing similar trends in the current quarter and next quarter time frames as well. And worst of all, analysts seem to have total agreement about SLCA’s prospects as not a single estimate has gone higher for the stock in the past 60 days.

Thanks to these factors, it shouldn’t be too surprising to note that SLCA has earned itself a Zacks Rank #5 (Strong Sell). This means that we expect SLCA to return to its losing streak and face more pain in the months ahead, and with the recent trend for silica prices and demand, this isn’t too hard to envision.

Other Picks

Clearly, SLCA is a stock that one should probably avoid right now, but are there better choices in the space?  There are few quality picks in the mining segment so let’s look to the broader oil world instead with Sprague Resources (SRLPSnapshot Report) a Zacks Rank #1 (Strong Buy) stock.

Not only was the stock recently upgraded from a #2 to a #1, but it also managed to surprise in its most recent earnings report by close to 20%. Add in an ‘A’ Value score and most investors would probably be better served by taking a closer look at SRLP instead of the lowly-ranked SLCA right now.

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