On Monday (NASDAQ:MNDY), H.C. Wainwright maintained its Buy rating and $12.00 stock price target for Newpark Resources (NYSE: NYSE:NR), following the company's third-quarter financial results. Newpark Resources, a player in the diversified industrial equipment and services industry, reported a decline in total revenues to $44.2 million for the third quarter of 2024, down from the $57.3 million recorded by its Industrial Solutions segment in the same period the previous year.
The company's gross profit for the quarter stood at $12.1 million, representing 27.5% of revenues. This is a decrease from the previous year's quarter, where the Industrial Solutions segment posted a gross profit of $19.7 million, or 34.4% of its revenues. Newpark Resources' operating income for the quarter was $1.2 million, a significant drop from the $6.3 million reported in the third quarter of 2023.
Adjusted EBITDA for the quarter amounted to $7.5 million or 17.0% of revenues. This represents a decline from the $19.7 million, or 34.4% of Industrial Solutions' revenues, reported in the third quarter of the previous year. The net income from continuing operations showed an increase to $14.9 million, or $0.17 per diluted share in the third quarter of 2024, up from $2.7 million, or $0.03 per diluted share, during the same period in 2023.
The reported increase in net income for the quarter includes a one-time benefit of $14.6 million, primarily from the release of valuation allowances on the company's U.S. net operating losses (NOLs) and other tax credit carry-forwards following the divestiture of the Fluids Systems business.
Newpark Resources ended the quarter with approximately $43 million in cash and cash equivalents as of September 30, 2024. The company also has approximately $28 million in Federal NOLs remaining on its books.
In other recent news, Newpark Resources reported a 23% decline in third-quarter revenue to $44 million, attributing the decrease to a variety of factors including seasonal slowdowns, changes in customer projects, and an unplanned maintenance shutdown at its Louisiana facility due to Hurricane Francine.
Despite these challenges, the company experienced a rebound in rental volumes towards the end of the quarter, driven by hurricane recovery efforts. Newpark is currently transitioning to a vertically integrated specialty rental and services business, and remains optimistic about the future.
The company's full-year revenue guidance has been revised to between $217 million and $223 million, with adjusted EBITDA expected to be between $77 million and $81 million.
As part of its future strategy, Newpark is targeting $5 million in cost savings and an improvement in SG&A as a percentage of revenue to the mid-teens for 2025. The company is also exploring options to enhance the value of its Katy office facility and considering credit facilities to increase liquidity.
Despite the revenue and adjusted EBITDA for Q3 falling short of the previous year's figures, Newpark is optimistic about customer demand moving into 2025. This optimism is supported by a recent customer survey and the company's focus on organic growth and regional expansion.
Recent developments also include the company's efforts to resolve $18 million in receivables related to working capital from a recent divestiture and exploration of potential acquisitions to consolidate its position as an access provider.
InvestingPro Insights
To complement the financial results and analyst rating discussed in the article, InvestingPro data provides additional insights into Newpark Resources' (NYSE: NR) current financial position and market performance.
As of the latest data, Newpark Resources has a market capitalization of $629.7 million. The company's P/E ratio stands at 18.8, indicating that investors are willing to pay $18.8 for every dollar of earnings. This valuation metric is particularly relevant given the company's recent financial performance and the analyst's maintained Buy rating.
Two InvestingPro Tips stand out as particularly relevant to the article's content. Firstly, Newpark Resources "holds more cash than debt on its balance sheet." This aligns with the article's mention of the company ending the quarter with $43 million in cash and cash equivalents, suggesting a strong liquidity position. Secondly, the company has seen a "significant return over the last week," with InvestingPro data showing a 10.81% price total return in the past week. This recent positive momentum could be of interest to investors considering the maintained Buy rating and $12.00 price target.
For readers interested in a more comprehensive analysis, InvestingPro offers 6 additional tips for Newpark Resources, providing a deeper understanding of the company's financial health and market position.
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