Helmerich & Payne Earnings: Recent Saudi Aramco Contract Should Help Offset Near-Term US Weakness

Helmerich & Payne posted fiscal second-quarter earnings slightly under our forecasts. The company had $688 million of revenue, an 11% drop from its $769 million in revenue this time last year. Adjusted operating margin dropped 200 basis points sequentially to 15% from 17%. A weak natural gas market in the US market and recent E&P consolidations drove this downward trend, as both factors affected the firm’s largest segment. After updating our model for slightly lower revenue and higher capital expenditures, we lower our fair value estimate to $48 from $50. Our no-moat rating remains unchanged.