Tuesday, drilling and construction services provider Layne Christensen Co. (LAYN) reported a 29.5% rise in first-quarter profit, driven by strength in minerals and natural gas prices and double-digit revenue growth in all three primary divisions. However, quarterly earnings per share rose a mere 5.8%, impacted by higher share count, and topped the analysts' consensus by a penny, with top line also beating market projections.
Mission Woods, Kansas- based company's net income for the first quarter climbed to $10.56 million from $8.15 million last year. Earnings per share rose to $0.55 from prior year's $0.52, reflecting a 22.5% rise in number of shares to 19.29 million. Analysts expected earnings of $0.54 per share for the first quarter.
First-quarter net income also increased from $9.61 million or $0.50 per share recorded in the preceding fourth quarter.
Andrew Schmitt, President and Chief Executive Officer, stated, "The strength in minerals and natural gas prices helped carry earnings past prior year levels. In our water infrastructure division, however, earnings were negatively impacted by heavy rains and snows in certain parts of the U.S."
Mineral exploration division earnings surged 102.3% from the prior year. The company's equity in earnings of affiliates went up 67.5% year-over-year to $2.50 million, driven by continued strong performance in the mineral exploration division by affiliates in Latin America, particularly in Chile.
Revenues for the quarter rose 21.3% to $244.54 million from $201.62 million last year, beating analysts estimate of $231.56 million. Quarterly revenues also came in above $223.589 million posted in the sequential fourth quarter.
Overall, revenues and earnings for the quarter were company records, the company noted. Among divisions, revenues from the Water infrastructure grew 17.6% from last year to $180.57 million, primarily driven by additional revenues from the company's acquisitions of Tierdael and SolmeteX, and an increase in sewer rehabilitation revenues. Meanwhile, the division's income before income taxes decreased 22.4%, while the backlog rose 10% to $370.74 million as of April 30, 2008.
Mineral exploration revenues climbed 37.7% year-over-year to $51.09 million, mainly attributable to continued strength in the markets due to relatively high gold and base metal prices.
In the Energy division, revenues rose 24.4% from the prior year to $11.88 million on higher production from unconventional gas properties and gas pricing in the market.
Layne Christensen's total selling, general and administrative expenses increased 12.4% year-over-year to $33.04 million mainly on acquisition expenses and wage and benefit increases. Meanwhile, interest expense decreased 61.3% as a result of debt paid off with proceeds of the company's stock offerings in October 2007.
Schmitt added, "Backlogs remain at record levels in the water infrastructure businesses and weather normally improves as we move towards the summer months. Our minerals and energy divisions should also remain strong."
In an April 9 research note, brokerage firm Morgan Joseph downgraded its rating on LAYN shares to 'Hold' from 'Buy'. On March 28, UBS initiated its coverage on the stock with 'Neutral'.
LAYN closed Monday's regular trading session at $53.17, up $2.04, on a volume of 369 thousand shares. In the past 52 weeks, shares have been trending in a range of $32.08-$59.19.
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