What the HEK?

Written by GSCR Staff   
Thursday, 09 May 2013 22:15

Back in late January we highlighted Heckman Corporation (NYSE – HEK – $3.47) at $3.78 as sort of an ‘out of the box’ pick as more of a longer term play than our normal short term trade in mind.  We set a price target of $5.00 and the stock climbed to $4.36 on March 27th, which would have been a 15% gain if you cashed out that day.  Since then the stock has been on the steady decline down to current levels.

As a refresher we liked the stock/company as a side play to the natural gas fracking industry.  Heckman provides wastewater solutions for shale and other alternative oil and gas exploration.  The Company offers water delivery and disposal, trucking, fluids handling, treatment, temporary and permanent pipeline facilities, and water infrastructure services for oil and gas exploration and production companies. 

One of the underlying drivers may be the continued low prices of natural gas itself which bottomed out at $2 per million BTU in late February from a high of $12 in 2008.  There was a nice rise in price to the $4.27 level in March, but now the commodity is back under $4.00.

Heckman announced 1Q13 results after the close yesterday with a miss.  It reported an EPS loss of $0.05 versus the $0.01 loss Street estimate and $159 million in actual revenue versus the $167 million forecast.  On the plus side, the Company is keeping its FY13 guidance but, but there was dramatic drop off in top line revenue from 4Q12 of $351 million.

HEK charts are very bearish in regard to technical analysis.  The disappointing financial report will probably only add to this sentiment and short term selling will continue.  If short term profit is your goal it is probably time to sell.  If you think this is a great long term play it may be, particularly as a niche inexpensive play on natural gas. But, we think the stock can be had for less, later in the year.

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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