Archrock, Inc. ((AROC)) has held its Q4 earnings call. Read on for the main highlights of the call.
Archrock, Inc. Reports Record Earnings and Positive Outlook for 2025
Archrock, Inc. delivered a strong earnings call, showcasing record financial results for 2024 and a promising outlook for 2025. Despite facing challenges such as seasonal softness in aftermarket services and increased SG&A expenses, the company achieved significant milestones in revenue growth, equipment utilization, and strategic acquisitions.
Record Adjusted EPS and EBITDA
Archrock reported impressive financial achievements with a 69% increase in adjusted EPS and over a 30% rise in adjusted EBITDA compared to the previous year. These results mark a record performance in both metrics, underscoring the company’s robust financial health.
High Equipment Utilization and Fleet Growth
The company maintained an all-time high equipment utilization rate of 96% and expanded its contract compression operating fleet by 716,000 horsepower. This growth highlights Archrock’s ability to efficiently manage and deploy its resources.
Strong Dividend Coverage and Shareholder Returns
Archrock demonstrated its commitment to shareholder value by returning $124 million in capital through dividends and share buybacks, achieving a dividend coverage of 3.1 times for 2024. This reflects the company’s strong cash flow and financial discipline.
Positive Outlook for 2025
Looking ahead, Archrock anticipates continued growth in natural gas production, supported by the EIA’s forecast of 2% to 3% annual growth. The company has a substantial contract backlog for 2025 and is already booking units for 2026 delivery, indicating a strong demand for its services.
Successful TOPS Acquisition
The acquisition of TOPS significantly contributed to Archrock’s record results in contract operations, leading to a notable increase in revenue and profitability. This strategic move has strengthened the company’s market position.
Seasonal Softness in Aftermarket Services
The AMS segment experienced a seasonal decline in revenue during the fourth quarter, compared to both the third quarter and the previous year. This softness is attributed to typical seasonal variations in the market.
Increased SG&A Expenses
SG&A expenses rose by $8 million sequentially in the fourth quarter, primarily due to higher stock price-driven long-term incentive compensation. This increase reflects the company’s investment in talent and performance-based rewards.
Guidance for 2025
Archrock provided comprehensive guidance for 2025, forecasting adjusted EBITDA between $750 million and $790 million, marking a nearly 30% increase from 2024. The company plans significant investments in fleet expansion, with over 200,000 new horsepower expected. Archrock aims to maintain a leverage ratio between 3 to 3.5 times while continuing to return $124 million to shareholders. The guidance underscores strong demand in the compression market, particularly in the Permian Basin, and emphasizes profitability and operational efficiency.
In conclusion, Archrock’s earnings call highlighted a year of record achievements and a positive outlook for the future. The company’s strategic initiatives, robust financial performance, and commitment to shareholder returns position it well for continued success in the coming years.