3 Things to Watch When Heckmann Corporation (HEK) Reports

Jefferies, of all places, recently downgraded the stock to “hold” from “buy.” With the well-documented fourth-quarter slowdown in drilling activity as context, it sees reasons for Heckmann to be hit by that sluggish activity and sees water-service pricing being challenged. Heckmann investors need to watch whether the company’s new Bakken business and other liquids-rich operations are able to overcome weaknesses elsewhere in its footprint.

3. Business outlook
The most important area to pay attention to is the company’s business outlook. There are a lot of questions I hope the company can answer. First, are there any more acquisitions in the pipeline? More importantly, given its near nationwide footprint, is the combined company now able to secure more businesses by providing a system of services? Finally, how likely is its ambitious target to hit $1 billion in revenue?

A weak outlook could hit shares hard, especially if the newly expanded company isn’t able to deliver on its growth promises. Look to see whether management’s outlook has changed or whether it’s seeing something Wall Street might be missing.

My Foolish take
While the fourth-quarter numbers might get a bit messy given the Power Fuels deal, I think the acquisition could turn out to be better than expected. The numbers coming out of Bakken producers all showed tremendous production growth. If Heckmann Corporation (NYSE:HEK) was able to capture its share of that growth and grow elsewhere in its footprint despite a challenging on-shore market, then 2013 could be a very good year for the company’s investors.

The article 3 Things to Watch When Heckmann Reports originally appeared on Fool.com.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Halliburton, owns shares of Heckmann, and has options on Heckmann.

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