Shares of U.S. Silica Holdings, Inc. SLCA scaled a new 52-week high of $40.24 yesterday, before pulling back to close the day at $39.80. The Maryland-based producer of commercial silica has delivered a solid year-to-date return of roughly 113%. Average volume of shares traded over the last three months is roughly 1,984.2K.
Factors to Consider
U.S. Silica posted better-than-expected results in second-quarter 2016. Its adjusted loss for the quarter came in at 17 cents per share, narrower than the Zacks Consensus Estimate of a loss of 23 cents. Revenues of $117 million also beat the Zacks Consensus Estimate of $116 million.
U.S. Silica is currently focusing on cost reduction and operational efficiency improvement. The company believes these measures will help it survive in the current downturn and increase profitability when the market reverses. The company is on track to deliver roughly $50 million of cost improvements in 2016.
Moreover, the company remains focused on preserving capital, improving customer satisfaction and boosting its market position in 2016. U.S. Silica also looks to spend capital prudently in 2016, giving priority to critical maintenance projects.
U.S. Silica’s strong balance sheet also provides it with ample opportunities for making strategic investments this that will help expand the life of its flagship operation and ensure its long-term competitive position in the market. The company’s decision to raise capital in first-quarter 2016 enhanced its financial flexibility and strengthened its balance sheet.
As part of its investment strategy, the company purchased a fully permitted, 327-acre parcel of land adjacent to its present silica sand mine and plant in Ottawa, IL, in May 2016. U.S. silica intends to use the property for future mining operations.
Moreover, the company agreed to acquire the NBR Sand unit of New Birmingham Inc. for $210 million in Jul 2016. This acquisition will enable U.S. Silica to expand its product offering and capacity in the regional sands market, and enhance customer satisfaction. U.S. Silica is optimistic about the growth of the regional sand market and is looking to create a strong foothold in the same.
However, the company is seeing sustained pressure in its Oil and Gas unit. U.S. Silica, in its second-quarter call, said that owing to lack of visibility in the oil and gas business, it will not provide any guidance for adjusted EBITDA until it gets a clear picture of business activity levels and related demand for its products.
U.S. Silica is a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked stocks in the basic materials space include Rio Tinto plc RIO, Klondex Mines Ltd. KLDX and McEwen Mining Inc. MUX. While Rio Tinto sports a Zacks Rank #1 (Strong Buy), both Klondex and McEwen Mining carry a Zacks Rank #2 (Buy).
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