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Archrock, Inc. (AROC)
:AROC
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Archrock
(NYSE:AROC)
74Outperform
Positive Factors
Earnings
AROC reported strong 3Q24 results and raised FY24 adj EBITDA guidance, indicating strong standalone performance.
Growth Prospects
The acquisition of Permian compression provider TOPS provides more scale in the growing Permian area, enhancing AROC's market position.
Negative Factors
Market Perception
Despite outperforming Midstream-at-large on the update, it is believed that the Street may still underappreciate the significance of AROC's revamped growth appetite and peer-leading balance sheet/profitability metrics.
Archrock (AROC) vs. S&P 500 (SPY)
Market Cap
$4.29B
Dividend Yield2.84%
Average Volume (3M)1.46M
Price to Earnings (P/E)23.3
Beta (1Y)1.27
Revenue Growth16.89%
EPS Growth55.94%
CountryUS
Employees1,100
SectorEnergy
Sector Strength76
IndustryFossil Fuels
Share Statistics
EPS (TTM)1.04
Shares Outstanding175,268,700
10 Day Avg. Volume1,811,163
30 Day Avg. Volume1,456,670
Financial Highlights & Ratios
PEG Ratio0.42
Price to Book (P/B)N/A
Price to Sales (P/S)3.70
Price to Cash Flow (P/CF)8.60
P/FCF Ratio40.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$30.20Price Target Upside25.52% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
Archrock Business Overview & Revenue Model
Company DescriptionArchrock, Inc. engages in the provision of operations, maintenance, service, and equipment for oil and natural gas production, processing, and transportation applications. It operates through the Contract Operations and Aftermarket Services segments. The Contract Operations segment is comprised of equity investment in the partnership, in addition to the owned fleet of natural gas compression equipment that the company use to provide operations services. The Aftermarket Services segment sell parts and components, provides operations, maintenance, overhaul, and reconfiguration services to customers. The company was founded on February 2, 2007 and is headquartered in Houston, TX.
How the Company Makes MoneyArchrock generates revenue primarily through two main streams: contract operations and aftermarket services. The contract operations segment involves providing turnkey natural gas compression services to customers under fixed-fee contracts, ensuring a stable and recurring revenue stream. This includes deploying and operating compression equipment on customer sites. The aftermarket services segment offers maintenance, repair, and overhaul services for compression equipment, leveraging Archrock's extensive network and expertise to support its clients' operations efficiently. Significant partnerships with oil and gas companies and long-term contracts further contribute to Archrock's earnings by ensuring ongoing demand for their services.
Archrock Financial Statement Overview
Summary
Archrock has demonstrated robust financial performance with notable improvements in revenue and profitability margins. The balance sheet remains stable with manageable leverage and improved equity returns. Cash flow generation is strong, supporting the company's operational and investment activities.Income Statement
Archrock demonstrated strong revenue growth with a 16.8% increase in 2024 compared to 2023. The gross profit margin improved significantly, reflecting efficient cost management. The net profit margin rose to 14.9%, indicating enhanced profitability. EBIT and EBITDA margins have also increased, showing robust operational performance.82
Very Positive
Balance Sheet
The company's debt-to-equity ratio is at 1.67, suggesting moderate leverage. Return on equity improved to 13.0%, indicating efficient use of shareholder funds to generate profit. The equity ratio stands at 34.6%, reflecting a stable capital structure with a balanced mix of debt and equity.75
Positive
Cash Flow
Free cash flow improved significantly in 2024, showcasing strong cash generation. The operating cash flow to net income ratio remains solid, indicating effective conversion of earnings to cash flow. However, the free cash flow to net income ratio is relatively lower, suggesting potential reinvestment needs.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.16B | 990.34M | 845.57M | 781.46M | 874.97M | Gross Profit |
| 1.16B | 375.08M | 261.82M | 243.60M | 304.64M | EBIT |
| 1.02B | 258.44M | -24.67M | -41.69M | 4.28M | EBITDA |
| 549.18M | 423.30M | 581.33M | 506.01M | 396.93M | Net Income Common Stockholders |
| 172.23M | 105.00M | 44.30M | 28.22M | -68.44M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 4.42M | 1.34M | 1.57M | 1.57M | 1.10M | Total Assets |
| 3.82B | 2.66B | 2.60B | 2.59B | 2.78B | Total Debt |
| 2.21B | 1.60B | 1.56B | 1.55B | 1.71B | Net Debt |
| 2.21B | 1.60B | 1.56B | 1.55B | 1.70B | Total Liabilities |
| 2.50B | 1.78B | 1.74B | 1.70B | 1.84B | Stockholders Equity |
| 1.32B | 871.02M | 860.69M | 891.44M | 935.56M |
| Cash Flow | Free Cash Flow | |||
| 70.56M | 11.55M | -36.42M | 139.51M | 194.98M | Operating Cash Flow |
| 429.59M | 310.19M | 203.45M | 237.40M | 335.28M | Investing Cash Flow |
| -1.16B | -232.49M | -130.92M | 16.11M | -85.03M | Financing Cash Flow |
| 733.55M | -77.92M | -72.54M | -253.03M | -252.84M |
Archrock Technical Analysis
Negative
24.06
Price Trends
26.92
Negative
25.13
Negative
22.44
Positive
Market Momentum
-0.96
Positive
39.25
Neutral
35.31
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AROC, the sentiment is Negative. The current price of 24.06 is below the 20-day moving average (MA) of 25.82, below the 50-day MA of 26.92, and above the 200-day MA of 22.44, indicating a neutral trend. The MACD of -0.96 indicates Positive momentum. The RSI at 39.25 is Neutral, neither overbought nor oversold. The STOCH value of 35.31 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AROC.
Archrock Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $41.44B | 14.06 | 18.47% | 2.02% | 9.10% | 55.56% | |
75 Outperform | $21.41B | 8.71 | 25.14% | 2.75% | -0.32% | -3.41% | |
75 Outperform | $54.50B | 12.90 | 21.59% | 2.77% | 9.58% | 6.53% | |
74 Outperform | $4.29B | 23.31 | 15.49% | 2.84% | 16.89% | 55.94% | |
70 Outperform | $2.97B | 35.27 | 94.47% | 8.31% | 12.32% | 247.77% | |
57 Neutral | $8.37B | 5.59 | -4.20% | 7.40% | 0.23% | -68.56% | |
56 Neutral | $706.15M | 22.52 | 13.17% | 0.27% | 2.76% | -23.59% |
* Energy Sector Average
Performance Comparison
AROC
Archrock
24.06
5.97
33.00%
BKR
Baker Hughes Company
41.74
10.53
33.74%
CLB
Core Laboratories
14.70
-1.32
-8.24%
HAL
Halliburton
24.34
-12.41
-33.77%
SLB
Schlumberger
39.93
-11.93
-23.00%
USAC
USA Compression
25.44
0.45
1.80%
Archrock Earnings Call Summary
Earnings Call Date: Feb 24, 2025 | % Change Since: -6.78% | Next Earnings Date: May 12, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong performance for Archrock in 2024, with record financial results and a positive outlook for 2025. While there were some challenges, such as seasonal softness in aftermarket services and higher SG&A expenses, these were outweighed by significant achievements in revenue growth, equipment utilization, and successful acquisitions.Highlights
Record Adjusted EPS and EBITDA
Archrock reported a 69% increase in adjusted EPS and more than a 30% increase in adjusted EBITDA compared to 2023, achieving records in both financial metrics.
High Equipment Utilization and Fleet Growth
The company maintained an all-time high equipment utilization rate of 96% and increased its contract compression operating fleet by 716,000 horsepower.
Strong Dividend Coverage and Shareholder Returns
Archrock returned $124 million in capital to shareholders through dividends and share buybacks, with a dividend coverage of 3.1 times for 2024.
Positive Outlook for 2025
Archrock expects continued growth in natural gas production, with the EIA forecasting 2% to 3% annual growth. The company has a substantial contract backlog for 2025 and is booking units for 2026 delivery.
Successful TOPS Acquisition
The acquisition of TOPS contributed to record results in contract operations, with a substantial increase in revenue and profitability.
Lowlights
Seasonal Softness in Aftermarket Services
The AMS segment experienced seasonal softness during the fourth quarter, with a decline in revenue compared to the third quarter and a year ago.
Increased SG&A Expenses
SG&A expenses increased by $8 million sequentially in the fourth quarter, largely due to higher stock price-driven long-term incentive compensation.
Company Guidance
During Archrock's fourth-quarter and full-year 2024 conference call, the company provided comprehensive guidance for 2025, highlighting a robust operational and financial performance. For 2025, Archrock anticipates adjusted EBITDA to reach between $750 million and $790 million, a nearly 30% increase from 2024. The company plans to invest $330 million to $370 million in growth capital, primarily for expanding its fleet, with over 200,000 new horsepower expected to be delivered. Archrock aims to maintain its leverage ratio between 3 to 3.5 times while returning $124 million to shareholders through dividends and buybacks in 2024. The guidance reflects strong demand in the compression market, particularly in the Permian Basin, with a focus on large midstream gas drive engines and electric motor drive units. Additionally, Archrock projects a 24% increase in contract operations revenue and a gross margin percentage range of 68% to 71% for 2025, emphasizing its commitment to maintaining profitability and operational efficiency.Archrock Corporate Events
M&A TransactionsBusiness Operations and Strategy
Archrock Acquires NGCSI and NGCSE for $357 Million
Positive
Mar 11, 2025
On March 10, 2025, Archrock entered into definitive agreements to acquire Natural Gas Compression Systems, Inc. (NGCSI) and NGCSE, Inc. in a cash and stock transaction valued at approximately $357 million. The acquisition is expected to enhance Archrock’s position as a premier provider of natural gas compression services, increasing its operational horsepower and expanding its footprint in the Permian Basin. The transaction is anticipated to be immediately accretive to Archrock’s earnings per share and cash available for dividends, with the deal expected to close in the second quarter of 2025, subject to customary closing conditions.
Business Operations and Strategy
Archrock Updates Investor Presentation Materials Online
Neutral
Mar 3, 2025
On March 3, 2025, Archrock, Inc. announced the posting of updated investor presentation materials on its website. This update aims to provide stakeholders with the latest insights into the company’s operations and strategic direction, potentially impacting its market positioning and investor relations.
Executive/Board Changes
Archrock Approves New Incentive Program for Executives
Neutral
Feb 24, 2025
On February 19, 2025, Archrock, Inc.’s board of directors’ compensation committee approved a short-term incentive program for its executive officers, with cash incentives based on performance indicators such as Adjusted EBITDA, sustainability, and operating team performance. Additionally, the committee announced adjustments to the base salaries of the executive officers, effective April 2025, reflecting modest increases across the board.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.