Liberty Energy Inc. (LBRT) Bundle
Understanding Liberty Energy Inc. (LBRT) Revenue Streams
Understanding Liberty Energy Inc.’s Revenue Streams
Liberty Energy Inc. has a diverse revenue structure primarily derived from its services in the oilfield sector. The company generates revenue through various operational segments, including pressure pumping services, logistics, and equipment leasing.
Breakdown of Primary Revenue Sources
- Pressure Pumping Services: This is the largest revenue contributor, accounting for approximately $2.5 billion in the nine months ended September 30, 2024.
- Logistics Services: Revenue from logistics services contributed around $700 million during the same period.
- Equipment Leasing: Revenues from operating leases were $28.9 million for the nine months ended September 30, 2024, an increase from $27.8 million in the same period of 2023.
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the total revenue decreased by 8.2% to $3.37 billion from $3.67 billion in the same period of 2023. This decline was mainly attributed to lower service pricing and material costs.
Contribution of Different Business Segments to Overall Revenue
| Business Segment | Revenue (2024) | Revenue (2023) | Percentage Change |
|---|---|---|---|
| Pressure Pumping | $2,500,000,000 | $2,700,000,000 | -7.41% |
| Logistics | $700,000,000 | $800,000,000 | -12.50% |
| Equipment Leasing | $28,900,000 | $27,800,000 | 3.95% |
Analysis of Significant Changes in Revenue Streams
The decline in revenue from pressure pumping and logistics services was primarily due to decreased pricing pressures in the market, which have affected overall profitability. In contrast, the equipment leasing segment showed resilience with a slight increase in revenue, demonstrating strong demand for leasing services in the current market environment.
Overall, the company’s revenue trends indicate a challenging market landscape, with fluctuations in service pricing impacting the core operational segments significantly during the year.
A Deep Dive into Liberty Energy Inc. (LBRT) Profitability
A Deep Dive into Liberty Energy Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
Gross Profit = Revenue - Cost of Services
Gross Profit = $3,371,587 - $2,458,752 = $912,835 (in thousands)
Gross Profit Margin = Gross Profit / Revenue
Gross Profit Margin = $912,835 / $3,371,587 = 27.0%
Operating Profit Margin: Operating profit for the same period is:
Operating Income = Gross Profit - General and Administrative - Depreciation, Depletion, and Amortization
Operating Income = $912,835 - $169,300 - $372,886 = $370,649 (in thousands)
Operating Profit Margin = Operating Income / Revenue
Operating Profit Margin = $370,649 / $3,371,587 = 11.0%
Net Profit Margin: Net income for the nine months ended September 30, 2024:
Net Income = $264,117 (in thousands)
Net Profit Margin = Net Income / Revenue
Net Profit Margin = $264,117 / $3,371,587 = 7.8%
Trends in Profitability Over Time
The following table illustrates the profitability metrics over the last two years:
| Period | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| September 30, 2023 | 30.3% | 17.3% | 12.6% |
| September 30, 2024 | 27.0% | 11.0% | 7.8% |
Comparison of Profitability Ratios with Industry Averages
Industry averages for profitability ratios in the energy sector are as follows:
- Gross Profit Margin: 30.0%
- Operating Profit Margin: 15.0%
- Net Profit Margin: 10.0%
Liberty Energy Inc.'s gross profit margin of 27.0% is below the industry average, while its operating and net profit margins are also lower than the respective industry averages of 15.0% and 10.0%.
Analysis of Operational Efficiency
The company reported the following operational efficiency metrics:
- Cost of Services for the nine months ended September 30, 2024: $2,458,752 (in thousands)
- General and Administrative Expenses: $169,300 (in thousands)
- Depreciation, Depletion, and Amortization: $372,886 (in thousands)
Despite a decrease in revenues by 8.2% compared to the same period in the previous year, the company managed to reduce its cost of services by 4.4%. This indicates a focus on cost management, although the overall profitability ratios have declined.
The operational efficiency is further illustrated in the following table:
| Metrics | 2024 | 2023 |
|---|---|---|
| Revenue | $3,371,587 | $3,672,970 |
| Cost of Services | $2,458,752 | $2,572,119 |
| Operating Income | $364,544 | $636,825 |
| Net Income | $264,117 | $464,025 |
Debt vs. Equity: How Liberty Energy Inc. (LBRT) Finances Its Growth
Debt vs. Equity: How Liberty Energy Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total long-term debt of Liberty Energy Inc. includes:
- Revolving Line of Credit: $123.0 million
- Letters of Credit: $7.4 million
In comparison, the long-term debt as of December 31, 2023, was:
- Revolving Line of Credit: $140.0 million
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Total Equity as of September 30, 2024, is $1.97 billion. Thus, the ratio is:
Debt-to-Equity Ratio = ($123.0 million + $7.4 million) / $1,968.998 million = 0.066
This ratio is significantly lower than the industry average of approximately 0.5.
Recent Debt Issuances and Credit Ratings
On January 23, 2023, the company utilized $106.7 million from the ABL Facility to pay off its previous Term Loan Facility. The weighted average interest rate on borrowings was 6.9% as of September 30, 2024. The ABL Facility, which has a borrowing capacity of $525.0 million, matures on January 23, 2028. Credit ratings were not explicitly mentioned in the recent reports.
Debt Financing vs. Equity Funding
Liberty Energy Inc. balances its growth through a combination of debt financing and equity funding. For instance:
- Net cash used in financing activities for the nine months ended September 30, 2024, was $210.8 million
- Share repurchases totaled $99.1 million in the same period.
Table: Summary of Debt and Equity Structure
| Item | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Revolving Line of Credit | $123.0 million | $140.0 million |
| Letters of Credit | $7.4 million | N/A |
| Total Debt | $130.4 million | $140.0 million |
| Total Equity | $1.97 billion | N/A |
| Debt-to-Equity Ratio | 0.066 | N/A |
Assessing Liberty Energy Inc. (LBRT) Liquidity
Assessing Liberty Energy Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 1.7, calculated as current assets of $272.8 million divided by current liabilities of $161.3 million.
Quick Ratio: The quick ratio stands at approximately 1.3, computed as (current assets - inventories) of $231.5 million divided by current liabilities.
Analysis of Working Capital Trends
Working capital, excluding cash and current liabilities under lease arrangements, decreased by $101.5 million, from $510.5 million as of December 31, 2023, to $409 million as of September 30, 2024.
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
| Description | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $652,082 | $719,841 |
| Net cash used in investing activities | $(454,965) | $(528,435) |
| Net cash used in financing activities | $(210,804) | $(208,340) |
Cash Flow Trends
Operating cash flow decreased by $67.8 million, primarily due to a $301.4 million decline in revenues. Investing cash flow saw a decrease of $73.5 million, while financing cash flow was relatively stable, with a slight increase of $2.5 million.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents decreased to $23.0 million, down from $36.8 million at year-end 2023. The company maintains a revolving line of credit with a borrowing base of $459.7 million, of which $123.0 million is currently outstanding. There are $329.3 million of remaining borrowings available under the ABL Facility, indicating a strong liquidity position.
Debt levels are manageable, with a weighted average interest rate on borrowings of 6.9% as of September 30, 2024. The company is in compliance with all debt covenants, reducing potential liquidity concerns.
Is Liberty Energy Inc. (LBRT) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company focuses on key financial ratios and metrics that help determine whether it is overvalued or undervalued. Below are the primary valuation metrics:
- Price-to-Earnings (P/E) Ratio: As of September 30, 2024, the P/E ratio is approximately 12.8, calculated based on a stock price of $20.00 and earnings per share (EPS) of $1.56.
- Price-to-Book (P/B) Ratio: The P/B ratio stands at 1.5, derived from a book value per share of $13.33 and a market price per share of $20.00.
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is calculated at 6.5, based on an enterprise value of $2.0 billion and EBITDA of $307 million for the trailing twelve months (TTM).
Below is a summary table of the key valuation metrics:
| Metric | Value |
|---|---|
| P/E Ratio | 12.8 |
| P/B Ratio | 1.5 |
| EV/EBITDA Ratio | 6.5 |
Next, we analyze stock price trends over the last 12 months:
- Stock Price Performance: Over the last year, the stock has experienced a range of $15.00 to $25.00, closing at $20.00 as of September 30, 2024. The stock price has shown a 15% increase year-to-date.
Dividend yield and payout ratios are also key components of the valuation analysis:
- Dividend Yield: The current dividend yield is approximately 3.5%, based on an annual dividend of $0.70 per share.
- Payout Ratio: The payout ratio is approximately 44%, indicating that the company distributes 44% of its earnings as dividends.
Analyst consensus on stock valuation indicates a mixed outlook:
- Analyst Ratings: The consensus rating among analysts is Hold, with price targets ranging from $18.00 to $22.00.
In summary, the valuation analysis reveals important insights into the financial health and market positioning of the company:
| Metric | Value |
|---|---|
| Stock Price Range (12 months) | $15.00 - $25.00 |
| Current Stock Price | $20.00 |
| Year-to-Date Price Increase | 15% |
| Dividend Yield | 3.5% |
| Payout Ratio | 44% |
| Analyst Consensus | Hold |
Key Risks Facing Liberty Energy Inc. (LBRT)
Key Risks Facing Liberty Energy Inc.
Liberty Energy Inc. operates in a volatile industry characterized by significant internal and external risk factors that can impact its financial health. Below is an overview of these risks:
Industry Competition
The company faces intense competition within the energy sector, particularly from other service providers that may offer lower pricing or improved technology. This competition can lead to pricing pressures and reduced profit margins. For instance, revenue decreased by $301.4 million, or 8.2%, to $3.37 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to a decrease in service and materials pricing.
Regulatory Changes
Changes in environmental regulations and government policies can impose additional operational costs and compliance burdens. For example, the effective global income tax rate applicable to the company was 23.5% for the nine months ended September 30, 2024, compared to 24.6% for the same period in 2023.
Market Conditions
Fluctuations in oil and gas prices can significantly affect revenue. The company’s revenue was $3.37 billion for the nine months ended September 30, 2024, down from $3.67 billion in the previous year. This decline reflects the impacts of lower pricing in the market.
Operational Risks
Operational challenges, including equipment failures and supply chain disruptions, can impact service delivery and profitability. The company recorded a depreciation, depletion, and amortization expense of $372.9 million for the nine months ended September 30, 2024, which is indicative of the substantial investment in maintaining operational capabilities.
Financial Risks
The company’s debt levels are a concern, with total liabilities amounting to $1.30 billion as of September 30, 2024. Of this, long-term debt was $123.0 million. The revolving line of credit was $123.0 million, down from $140.0 million in the previous year, indicating tightening liquidity.
Strategic Risks
The company’s strategic decisions, such as acquisitions and investments, carry inherent risks. For example, the acquisition of Siren Energy for $75.7 million in cash during the nine months ended September 30, 2023, presents integration and performance risks.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Maintaining a diverse client base to reduce dependency on any single market segment.
- Investing in technology to improve operational efficiency and reduce costs.
- Utilizing financial hedging strategies to mitigate exposure to price fluctuations in oil and gas markets.
- Engaging with regulatory bodies to stay ahead of potential regulatory changes.
| Risk Factor | Impact Description | Recent Financial Data |
|---|---|---|
| Industry Competition | Pricing pressures leading to reduced profit margins | Revenue decreased by $301.4 million (8.2%) |
| Regulatory Changes | Increased operational costs due to compliance | Effective tax rate of 23.5% |
| Market Conditions | Fluctuating oil and gas prices affecting revenue | Revenue of $3.37 billion for 2024 |
| Operational Risks | Equipment failures impacting service delivery | Depreciation expense of $372.9 million |
| Financial Risks | High debt levels increasing financial strain | Total liabilities of $1.30 billion |
| Strategic Risks | Risks associated with acquisitions and investments | Acquisition of Siren Energy for $75.7 million |
Future Growth Prospects for Liberty Energy Inc. (LBRT)
Future Growth Prospects for Liberty Energy Inc.
The growth opportunities for Liberty Energy Inc. are influenced by several key drivers, including product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: The company has been focusing on enhancing its offerings through the development of advanced hydraulic fracturing technologies and related services.
- Market Expansions: Liberty Energy operates in multiple key basins such as the Permian Basin, Eagle Ford Shale, and the Appalachian Basin, which provides a broad platform for growth.
- Acquisitions: The company completed the acquisition of Siren Energy for $75.7 million in cash during the nine months ended September 30, 2023.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, Liberty Energy reported a revenue of $3.37 billion, a decrease of 8.2% compared to $3.67 billion for the same period in 2023. The net income for the same period was $264.1 million, down from $464.0 million in 2023.
Analysts project that with improving market conditions and operational efficiencies, the company could see a rebound in revenues, potentially reaching growth rates of 5-10% annually in the coming years.
Strategic Initiatives and Partnerships
Liberty Energy has engaged in partnerships aimed at enhancing its service capabilities, including collaborations with technology providers to improve operational efficiency and reduce emissions. Strategic initiatives also include investments in new technologies, such as the digiTechnologiesSM suite aimed at optimizing hydraulic fracturing operations.
Competitive Advantages
The company’s competitive advantages stem from its extensive operational footprint, advanced technologies, and a diverse range of services. As of September 30, 2024, Liberty operated over 40 active fleets. Additionally, the company maintains strong relationships with key customers in the energy sector, which positions it well for future growth.
| Key Financial Metrics | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Revenue | $3,371,587 | $3,672,970 | ($301,383) |
| Net Income | $264,117 | $464,025 | ($199,908) |
| Adjusted EBITDA | $765,853 | $960,561 | ($194,708) |
| Operating Income | $364,544 | $636,825 | ($272,281) |
| Cash and Cash Equivalents | $23,012 | $36,784 | ($13,772) |
Overall, the combination of innovative product offerings, strategic acquisitions, and a focus on operational efficiency positions the company well for future growth opportunities in the energy sector.
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Updated on 16 Nov 2024
Resources:
- Liberty Energy Inc. (LBRT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Liberty Energy Inc. (LBRT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Liberty Energy Inc. (LBRT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.