Rattler Midstream Q3 Earnings: Is NasdaqGS:RTLR Cheap at 7.2x Forward P/E?

in EARNINGS/INVESTING IDEAS by

Rattler Midstream LP (NasdaqGS:RTLR) is scheduled to report Q3 earnings results after markets close for trading on November 4, 2020.

The company is expected to report earnings of $0.23/share on revenue of $94.174 million. The consensus earnings per share (EPS) of $0.23/share is based on a poll of 9 analysts and represents a decline in eps of −12.9% over the same quarter last year, when the company reported earnings of $0.26/share.

The revenue forecast of $94.174 million based on a poll of 10 analysts implies a year-over-year (YoY) decline in revenue of −18.4%. Last year the company reported $115.4 million in revenue for the quarter.

Expected to report EPS contraction of −12.9% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $94.17 $115.42 −18.4%
EPS $0.23 $0.26 −12.9%

Earnings Call Trends

Historically, management has exceeded analyst expectations 1 out of the last 5 tracked quarters, and missed expectations 4 quarters.

What are your expectations from Rattler Midstream LP for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.21 $0.15 −28.3% Missed
Q1, 2020 $0.32 $0.28 −13.5% Missed
Q4, 2019 $0.29 $0.27 −6.4% Missed
Q3, 2019 $0.26 $0.26 1.0% Beat
Q2, 2019 $0.35 $0.31 −12.4% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $8.06 $8.07 0.1% Increase
May 6, 2020 $7 $7.65 9.3% Increase
February 18, 2020 $14.95 $15.60 4.3% Increase
November 5, 2019 $15.37 $14.87 −3.3% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of 0.56, the model suggests that the company is likely an earnings manipulator. A value of 0.56 implies a 28.8% chance of earnings manipulation.

Fundamentals And Technical Analysis

Rattler Midstream LP is currently trading at $5.82/share, down −5.7% for the day. The company is trading at approximately 31.8% of its 52-week high of $18.41/share. The company’s stock price is down −27.9% since the last earnings report and down −6.4% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 41.86 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:RTLR Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 6.84 and a forward P/E multiple of 7.17.

Rattler Midstream LP’s current share price also implies a price-to-book (P/B) multiple of 2.22. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $5.82
P/E Ratio 6.8x
P/E Ratio (Fwd) 7.2x
PEG Ratio −4.6
Total Debt / Total Capital 23.3%
Levered Free Cash Flow -$19.778 million
EV / EBITDA 4.1x

Finbox

Rattler Midstream LP is a micro-cap stock with a market capitalization of $271.5 million and a total enterprise value of $1.568 billion. The company operates in the Energy sector and the Oil, Gas & Consumable Fuels industry.

Rattler Midstream LP owns, operates, develops, and acquires midstream infrastructure assets in the Midland and Delaware Basins of the Permian Basin in West Texas. The company operates in two segments, Midstream Services and Real Estate Operations. It provides crude oil, natural gas, and water-related midstream services. As of December 31, 2019, the company owned and operated 867 miles of crude oil gathering pipelines, natural gas gathering pipelines, and an integrated water system on acreage that overlays Diamondback’s seven core Midland and Delaware Basin development areas. It also rents real estate properties. Rattler Midstream GP LLC serves as the general partner of the company. The company was formerly known as Rattler Midstream Partners LP. The company is based in Midland, Texas. Rattler Midstream LP is a subsidiary of Diamondback Energy, Inc.

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