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Archrock, Inc. (AROC)
:AROC
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Archrock (AROC) AI Stock Analysis

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AROC

Archrock

(NYSE:AROC)

Rating:74Outperform
Price Target:
$26.00
▲(18.18% Upside)
Archrock's financial performance is strong, with significant profit growth and strategic initiatives supporting future expansion. High leverage and negative free cash flow are risks, balanced by strong cash generation. Technical indicators suggest caution due to bearish momentum. Valuation is moderate, offering a reasonable dividend yield. Overall, Archrock shows potential for growth, with considerations for financial and market conditions.
Positive Factors
Earnings
The acquisition of Natural Gas Compression Systems is expected to be immediately accretive to both EPS and cash available for dividend per share, with an estimated ~3% FY25 accretion pre-synergies.
Growth Strategy
AROC's impressive FY25 outlook and planned growth capex increase were bullish and could argue for re-rating relative to publicly-traded peers.
Market Position
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.
Valuation
AROC's tilt towards large-HP compression has aligned its fleet with peers, making its valuation discount appear too punitive.

Archrock (AROC) vs. SPDR S&P 500 ETF (SPY)

Archrock Business Overview & Revenue Model

Company DescriptionArchrock, Inc., together with its subsidiaries, operates as an energy infrastructure company in the United States. It operates in two segments, Contract Operations and Aftermarket Services. The company engages in the designing, sourcing, owning, installing, operating, servicing, repairing, and maintaining its owned fleet of natural gas compression equipment to provide natural gas compression services to customers in the oil and natural gas industry. It also offers various aftermarket services, such as sale of parts and components; and provision of operation, maintenance, overhaul, and reconfiguration services to customers who own compression equipment. The company was formerly known as Exterran Holdings, Inc. and changed its name to Archrock, Inc. in November 2015. Archrock, Inc. was founded in 1990 and is headquartered in Houston, Texas.
How the Company Makes MoneyArchrock generates revenue primarily through its two main business segments: Contract Operations and Aftermarket Services. The Contract Operations segment is the largest revenue driver, involving long-term contracts where Archrock owns, operates, and maintains compression equipment for customers, charging them monthly service fees. This segment provides a stable and recurring revenue stream, as it typically involves multi-year agreements with energy companies. The Aftermarket Services segment includes the sale of parts and services for customers who own their compression equipment. This includes maintenance, repair, and overhaul services, which are essential for ensuring optimal equipment performance and reliability. Additionally, Archrock's strategic partnerships with oil and gas producers and transporters, as well as its large fleet of compression equipment and experienced workforce, further enhance its ability to secure and maintain long-term contracts, contributing significantly to its financial performance.

Archrock Earnings Call Summary

Earnings Call Date:Aug 04, 2025
(Q2-2025)
|
% Change Since: -2.65%|
Next Earnings Date:Oct 29, 2025
Earnings Call Sentiment Positive
The earnings call reflected strong financial performance and growth prospects with record-breaking metrics and strategic confidence, despite minor challenges in specific segments and market conditions.
Q2-2025 Updates
Positive Updates
Record-Breaking Financial Performance
Adjusted EPS increased by nearly 70% and adjusted EBITDA by more than 60% compared to the second quarter of 2024. The company recorded a quarterly adjusted gross margin percentage of 70% for the third quarter in a row.
Fleet and Utilization Growth
The contract compression operating fleet increased by more than 368,000 horsepower, with a fleet utilization rate of 96%.
Dividend and Share Repurchase Program
Quarterly dividend per share was raised by 11% compared to the prior quarter and 27% compared to a year ago, with a robust dividend coverage of 3.4x. Since April 2023, the company repurchased 2.7 million shares of common stock.
Strong Market Outlook
Expectations for growing LNG exports and power generation needs to create significant demand for U.S. natural gas production and midstream infrastructure. Anticipated natural gas demand growth of 20 to 30 Bcf a day by 2030.
Operational and Strategy Confidence
Archrock has solidified its position as the compression partner of choice with a geographically diverse fleet and a strong commitment to growth in earnings, free cash flow, and returns.
Negative Updates
Impairment on Gas Lift Business
A negative $0.04 impact on EPS from an impairment on the high-pressure gas lift business sold to Flowco.
Challenges in Equipment Sales
Second quarter AMS gross margin percentage decreased slightly due to a higher mix of part sales.
Pressure on Electric Motor Drive Demand
Shift in customer preference from electric motor drive to gas drive due to power availability issues, impacting the electric motor drive growth.
Company Guidance
During the Archrock second quarter 2025 conference call, the company provided an optimistic outlook for the rest of the year and beyond, citing strong operational and financial execution with several quarterly records. Archrock reported a nearly 70% increase in adjusted EPS and over a 60% rise in adjusted EBITDA compared to the same period in 2024. The company's fleet utilization remained high at 96%, with a sequential increase of more than 368,000 horsepower in their contract compression operating fleet. Despite funding the $297 million NGCS acquisition, Archrock maintained a low leverage ratio of 3.3x and raised its quarterly dividend per share by 11% compared to the previous quarter. The company also accelerated share repurchases, citing a disconnect between its stock performance and the strength of its business fundamentals. Archrock increased its 2025 adjusted EBITDA guidance to $810-850 million, reflecting strong performance and market demand, particularly in the Permian Basin. Additionally, Archrock anticipates a minimum of $250 million in growth CapEx for 2026, supported by multi-year contracts with blue-chip customers.

Archrock Financial Statement Overview

Summary
Archrock demonstrates strong revenue and profit growth with improved margins. High leverage is a concern, but profitability and equity returns are strong. Negative free cash flow poses a risk but is mitigated by substantial operating cash flow.
Income Statement
85
Very Positive
Archrock has demonstrated impressive revenue growth with a 24.0% increase from 2023 to 2024 and a 6.8% rise in the TTM period. Gross profit margin stands at 45.1% for TTM, indicating effective cost management. Net profit margin improved to 16.4% TTM, up from 14.9% in 2024, reflecting enhanced profitability. The company's EBIT and EBITDA margins have also shown strength, standing at 33.4% and 49.8% respectively for TTM.
Balance Sheet
70
Positive
The debt-to-equity ratio is relatively high at 1.71, indicating a significant leverage level. However, the equity ratio of 34.0% suggests a stable equity base supporting the company's assets. Return on equity has improved to 15.0% TTM, showcasing better profitability from equity investments. Overall, while leverage is a concern, profitability metrics show positive trends.
Cash Flow
60
Neutral
Operating cash flow to net income ratio is robust at 2.01 in the TTM period, reflecting strong cash generation relative to profits. However, free cash flow has turned negative due to capital expenditures exceeding cash flow from operations. This shift in free cash flow could constrain financial flexibility if continued.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.35B1.16B990.34M845.57M781.46M874.97M
Gross Profit619.21M505.90M375.08M261.82M243.60M304.64M
EBITDA686.45M549.18M423.30M581.33M506.01M396.93M
Net Income231.54M172.23M105.00M44.30M28.22M-68.44M
Balance Sheet
Total Assets0.003.82B2.66B2.60B2.59B2.78B
Cash, Cash Equivalents and Short-Term Investments0.004.42M1.34M1.57M1.57M1.10M
Total Debt0.002.21B1.60B1.56B1.55B1.71B
Total Liabilities0.002.50B1.78B1.74B1.70B1.84B
Stockholders Equity1.41B1.32B871.02M860.69M891.44M935.56M
Cash Flow
Free Cash Flow128.19M70.56M11.55M-36.42M139.51M194.98M
Operating Cash Flow464.34M429.59M310.19M203.45M237.40M335.28M
Investing Cash Flow-1.53B-1.16B-232.49M-130.92M16.11M-85.03M
Financing Cash Flow817.66M733.55M-77.92M-72.54M-253.03M-252.84M

Archrock Technical Analysis

Technical Analysis Sentiment
Negative
Last Price22.00
Price Trends
50DMA
24.02
Negative
100DMA
24.15
Negative
200DMA
24.42
Negative
Market Momentum
MACD
-0.41
Positive
RSI
36.11
Neutral
STOCH
15.96
Positive
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 22 is below the 20-day moving average (MA) of 22.94, below the 50-day MA of 24.02, and below the 200-day MA of 24.42, indicating a bearish trend. The MACD of -0.41 indicates Positive momentum. The RSI at 36.11 is Neutral, neither overbought nor oversold. The STOCH value of 15.96 is Positive, 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 (56)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
77
Outperform
$4.14B8.5935.14%1.74%-5.35%-4.15%
76
Outperform
$304.60M17.966.77%22.64%78.46%
76
Outperform
$2.21B11.0427.08%8.14%62.72%
74
Outperform
$0.0017.2719.85%3.48%20.14%43.55%
71
Outperform
$2.78B60.033.88%5.44%45.41%-37.84%
62
Neutral
$0.0034.97148.57%8.98%8.22%28.05%
56
Neutral
C$4.11B-0.170.41%6.51%5.45%-66.94%
* Energy Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
AROC
Archrock
22.00
4.13
23.11%
NGS
Natural Gas Services Group
24.31
5.54
29.52%
OII
Oceaneering International
22.10
-2.92
-11.67%
WFRD
Weatherford International
57.60
-43.05
-42.77%
USAC
USA Compression
23.38
3.36
16.78%
KGS
Kodiak Gas Services, Inc.
31.59
6.10
23.93%

Archrock Corporate Events

Private Placements and FinancingBusiness Operations and Strategy
Archrock Expands Credit Facility to Boost Flexibility
Positive
May 16, 2025

On May 16, 2025, Archrock, Inc. and its subsidiaries entered into a Second Amendment to their Amended and Restated Credit Agreement with JPMorgan Chase Bank and other financial institutions. This amendment increases the credit facility from $1.1 billion to $1.5 billion, with the potential to further increase it to $2.25 billion, enhancing Archrock’s financial flexibility and potentially impacting its operational capabilities and market positioning.

The most recent analyst rating on (AROC) stock is a Buy with a $24.00 price target. To see the full list of analyst forecasts on Archrock stock, see the AROC Stock Forecast page.

Business Operations and Strategy
Archrock Updates Investor Presentation Materials Online
Neutral
May 7, 2025

On May 6, 2025, Archrock, Inc. announced the posting of updated investor presentation materials on its website. This update is part of their ongoing efforts to provide transparency and information to investors, although the materials are not incorporated into any formal financial filings.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jul 31, 2025