USA Compression Stock: Market-Thumping 8.8%-Yielder Reported Record Results
June 4, 2024
Why USAC Stock Has High Potential
During the gold rush of the mid-1800s, hundreds of thousands of optimistic gold miners made their way to California and the Yukon to find their fortunes. Few did.
One group of shrewd individuals who did make out like bandits, though, were those who sold to prospectors much-needed gold mining tools: picks and shovels.
That’s kind of what USA Compression Partners LP (NYSE:USAC) does, except in the energy sector.
One industry that tends to do well no matter where oil and natural gas prices are is oil and gas equipment and services. That’s because oil and gas companies need their infrastructure serviced on a regular basis.
Due to distance and friction, natural gas loses pressure as it moves through pipelines. Compression ensures that the gas continues to move smoothly through the pipelines. Compressors are also used at above-ground and underground natural gas storage facilities.
Austin, Texas-based USA Compression Partners LP is one of the country’s largest independent providers of natural gas compression services. The partnership provides its services under fixed-term contracts to various energy companies, including independent producers, processors, gatherers, and transporters of natural gas and crude oil. (Source: “Energy Infrastructure CEO & Investor Conference,” USA Compression Partners LP, May 22, 2024.)
The company focuses on providing natural gas compression services to midstream infrastructure applications such as high-volume oil and gas gathering systems, processing facilities, and transportation networks.
These essential services have helped USA Compression Partners LP generate stable cash flows during all commodity cycles. Why? In addition to helping grill hamburgers and steaks, natural gas is the largest source of electricity in the U.S., as well as a major source of heating around the world.
USA Compression stock is a great stock for income investors.
The partnership uses its cash flow to cover its quarterly dividends, which it has paid uninterrupted since it went public in 2013. Moreover, the company has never lowered its dividend. (Source: “Distributions & Splits,” USA Compression Partners LP, last accessed May 30, 2024.)
As of this writing, USAC stock pays dividends of $0.525 per unit, for a yield of 8.79%.
USA Compression stock has been one of the most reliable stocks in terms of overall returns. With dividends reinvested, the stock’s returns have rallied by an impressive 411% (as of this writing). USAC stock has returned in excess of $1.6 billion in cash to unitholders.
Record-High Financial & Operational Results
For the first quarter ended March 31, USA Compression announced that its total revenues increased by 16.3% year-over-year to a record-high $229.3 million. Its net income more than doubled year-over-year to $23.6 million. (Source: “USA Compression Partners Reports First-Quarter 2024 Results; Updates 2024 Outlook; Achieves Record Utilization and Financial Results,” USA Compression Partners LP, May 7, 2024.)
The partnership’s net cash provided by operating activities went up in the first quarter by 55.8% year-over-year to $65.9 million. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the quarter were a record-high $139.4 million.
The company’s distributable cash flow grew in the first quarter by 38.3% year-over-year to $86.6 million, and its distributable cash flow coverage rose year-over-year from 1.21 times to 1.41 times.
On the operational front, the company reported record-high average horsepower utilization of 94.8%, record-high average revenue-generating horsepower of 3.47 million, and record-high average revenue per revenue-generating horsepower per month of $19.96.
Commenting on the results, Eric D. Long, USA Compression Partners LP’s president and CEO, said, “Our first-quarter financial and operational results marked a strong start to 2024 after an outstanding 2023. Our first-quarter 2024 results again achieved record-setting revenues and Adjusted EBITDA, as well as a new record for average and exit utilization of nearly 95-percent.” (Source: Ibid.)
USAC Compression Stock Hit Another Record High
Typically, a high distribution yield is a result of a low share price. This isn’t the case with USAC stock, though. On April 4, the stock hit a new record high of $27.88 per share.
USA Compression stock has given up some ground since then, but it continues to outpace the broader market. Trading at $24.38 per share as of this writing, USAC stock is up by 10.2% year-to-date and 40.5% year-over-year.
Solid gains, and the outlook for USA Compression stock is good. Wall Street analysts have provided a 12-month median share-price estimate of $26.00 and high share-price estimate of $30.00. This points to potential gains in the range of 7.75% to 14.5%.
Chart courtesy of StockCharts.com
The Lowdown on USA Compression Partners LP
USA Compression Partners LP is a terrific energy company that provides essential natural gas compression services across geographically diverse areas. This helps the partnership generate secure and stable cash flow, which allows it to provide investors with durable returns on capital.
After reporting outstanding, record-best financial results for 2023, the company kicked off 2024 with record-setting revenues, adjusted EBITDA, average utilization, and exit utilization.
The good times are expected to continue. Despite the current low price of natural gas, the company says there’s a bright outlook for gas demand as new liquified natural gas (LNG) export capacity goes online and artificial intelligence (AI) and data centers increase the demand for electricity generation.
USA Compression Partners LP forecasts that the positive outlook for natural gas demand, plus the ongoing high demand for oil, will keep the demand for the company’s services high. This should allow USAC stock to continue returning value to shareholders in the form of rising share prices and reliable dividends.
