ChampionX Corporation (CHX) in The Woodlands, Tex., is a global leader in chemical solutions and highly developed equipment and technology that assist enterprises worldwide in drilling and producing oil and gas safely and efficiently. Its products provide effective operation throughout a well's lifespan, emphasizing the production phase.
The company's shares have surged 19.5% in price year-to-date and 11.1% over the past month to close yesterday's trading session at $24.15.
CHX is undertaking various measures to boost its growth. Furthermore, it is devoted to assisting in the decarbonization of oil and gas operations through innovative technological solutions, while also enabling clients to optimize the value of their producing assets. This should help the company achieve substantial momentum in the near term.
Here is what could shape CHX's performance in the near future:
Share BuyBack
This month, CHX announced the approval of a new $250 million share buyback program by its board of directors. The company's common stock shares may be repurchased regularly under its 2022 Share Repurchase Program, either on the open market or in privately negotiated deals. With this new share repurchase authorization, the company intends to return surplus cash to shareholders while also paying a sustainable dividend that will grow with free cash flow while maintaining the company’s target debt leverage ratio during industry cycles.
Strategic Acquisition
Last December, CHX acquired Tomson Technologies LLC and Group 2 Technologies LLC, two pioneers in nanotechnology platforms with proven commercial applications that assist energy businesses reduce their carbon footprint and operational expenditures in oil and gas production operations. Sivasankaran "Soma" Somasundaram, president and CEO of ChampionX, said, "the acquisition of Tomson Technologies and Group 2 Technologies adds to our suite of technologies that help our customers reduce their carbon footprint and represents another step forward on the path toward our long-term strategic priority of evolving our portfolio for sustained growth as the energy industry evolves."
Robust Financials
During the fourth quarter, ended Dec. 31, 2021, CHX's revenue increased 16.4% year-over-year to $822.15 million. Its gross profit increased 23.6% year-over-year to $205.32 million. The company's net income grew 490.6% from its year-ago value to $43.45 million, while its EPS grew 425% from the prior-year quarter to $0.21. In addition, its cash and cash equivalents came in at $251.68 million for the year ended Dec. 31, 2021, representing a 24.9% year-over-year increase.
Impressive Growth Prospects
The Street expects CHX's revenues and EPS to rise 12.6% and 90%, respectively, year-over-year to $3.46 billion and $1.14 in its fiscal 2022. In addition, CHX's EPS is expected to rise at a 56.4% CAGR over the next five years. Also, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in three of the trailing four quarters.
Consensus Rating and Price Target Indicate Potential Upside
Among the five Wall Street analysts that rated CHX, three rated it Buy, and two rated it Hold. The 12-month median price target of $28.75 indicates a 19.1% potential upside. The price targets range from a low of $24.00 to a high of $33.00.
POWR Ratings Reflect Solid Prospects
CHX has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CHX has a B grade for Quality and Sentiment. CHX's solid earnings and revenue growth potential are consistent with its Quality grade. In addition, the favorable analyst's price targets and ratings are in sync with its Sentiment grade.
Among the 41 stocks in the C-rated Energy – Services industry, CHX is ranked #3.
Beyond what I stated above, we have graded CHX for Growth, Stability, Value, and Momentum. Get all CHX ratings here.
Bottom Line
CHX has exhibited robust financial performance in its last quarterly release and is on track to deliver solid growth in the coming months based on its various strategic collaborations and initiatives. In addition, given the favorable analysts' price targets and its financial strength, the stock could deliver solid gains in the near term. So, we think the stock could be a great bet now.
How Does ChampionX Corporation (CHX) Stack Up Against its Peers?
CHX has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: Rex American Resources Corp. (REX) and North American Construction Group Ltd. (NOA).
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CHX shares rose $0.73 (+3.02%) in premarket trading Thursday. Year-to-date, CHX has gained 19.50%, versus a -8.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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