Here’s Why Expedia’s Shares Are Falling This Morning

Those fearing that Expedia expe lost its guardian angel with the departure of CEO Dara Khosrowshahi to Uber will be feeling vindicated this morning.

Shares in the online travel services company are being marked down sharply Friday after a bleak earnings report that fell short of consensus forecasts and led the company to cut its own forecast for earnings this year. The company’s top managers also told analysts in a conference call late Thursday that 2018 would be difficult too, due not least to spending on Cloud-based infrastructure and services, along with marketing efforts.

The company said hurricanes and a poor performance by its Trivago hotel-search website would mean that this year’s basic operating profit (before interest, taxes, depreciation and amortisation) would now be up less than 10% from last year. It had previously forecast a rise of up to 15%.

“After recording strong second-quarter results, Expedia reversed course in the third-quarter, missing on every single metric, including a 4 percent room-night shortfall versus expectations,” Benchmark Company analyst Daniel Kurnos said. “It may take some time … to regain its momentum.”

The company did not provide a detailed 2018 forecast, but said its expectations for Trivago were now “significantly lower than they otherwise would have been,” after a quarter in which advertizers were put off by changes to its pricing policy (it also spent heavily on a duff advertising campaign of its own). Trivago had a basic operating loss of $ 8 million operating loss in the quarter.

Several analysts said competitor Priceline pcln may be the chief beneficiary of Expedia losing its way.

“We believe Expedia and Trivago are facing more company-specific issues, and given Expedia’s comments around a strong macro lodging environment, we think impact to Priceline should be limited,” said JPMorgan Securities analyst Doug Anmuth.

Tech

Lost Faith That You'll Ever Be a Success? This is For You

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

You know the feeling.

Everything you try turns to dust. Or, worse, debt. 

You thought it was a good idea. It looked like it was working.

And then, well, something intervened. Or someone. 

Suddenly, you’re staring at having to explain another failure. 

Or what you think is a failure. Or, even worse, what other people think is a failure.

You want to scream. You want to rail at the fates, at your own decisions and at all the things you could have done differently.

Oh, I’ve described you too well?

I apologize. But I have something for you.

Watch this. All the way to the end. Don’t give up. Please.

There.

How did that make you feel?

That your competitors are arrogant humans, who want to stomp over your every effort and then celebrate in your face?

That your co-workers would happily cheer your demise, because that’s just how they roll?

That there are times when you just stand there and hang your head, not knowing what else you’re supposed to do?

Or did it make realize that life makes no sense and success can be largely, very largely the product of stunning good fortune?

Did it make you want to get up tomorrow and still believe a little bit, just in case the orb spins your way for once?

I’m not one for mindless, self-help clappy-trappy ra-ra. 

I’ll never write My Fabulous Two-Minute Work Week nor The Secret Way To Overcome Every Obstacle Without Getting Out Of Bed. 

Nor even Macramé Management: How Knot To Be Successful.

But just look at that goalkeeper. The one who celebrated success just a little too soon.

And then be the player who took the penalty.

Life is even stranger than you think.

Tech

Ivanka Trump's Punk Phase and Ted Cruz's Tweeting Top This Week's Internet News

Following a week in which Twitter announced a schedule to try and make the platform less awful and the Scaramucci Post seemed hellbent on proving all of its critics right, it’s important to take a moment to think about what’s really important in life.

Please remember @catsu as you explore the mixed bag of randomness the internet offered over the last seven days. It might be the only thing that will keep you sane.

Punk as … Huh?

What Happened: Of all the Trump children, which one do you think is the most likely to have listened to Nirvana and really felt bad when Kurt Cobain died? The answer may surprise you, if you were thinking Eric or Donald Jr.

What Really Happened: Even this far into our relationship with the First Daughter, Ivanka Trump knows how to surprise us all, it seems.

The story came from Ivanka’s latest memoir, Raising Trump, in which she writes about her “punk phase in the nineties,” when she was “really into Nirvana.” Twitter was, shall we say, somewhat unconvinced:

While the media reported on Ivanka’s Twitter dragging, someone realized folks could simply go back and look at photos of Ivanka during this punk phase and see the evidence first-hand:

The Takeaway: Oh, it’s easy to mock, but there are always more layers to the truth than people think.

Thank You for Your Service

What Happened: If there was one issue being discussed more than any other on social media last week, it was the ways in which a president should console grieving military families.

What Really Happened: In one of the stranger moments of political theater in recent months—an increasingly competitive space, let’s be honest—President Trump responded to a question about his lack of comment on the deaths of US soldiers in Niger by criticizing President Obama over whether or not he’d called families of fallen soldiers. Trump, of course, said that he would certainly call the families of the dead soldiers when he felt it was appropriate, which seemingly turned the whole incident into an even bigger embarrassment for all involved.

Wait. What? The report came from US congresswoman Frederica Wilson (D-Florida), a friend of the family of Army Sgt. La David Johnson, who heard Trump’s call to his widow on speakerphone. “We were in the car together, in the limousine headed to meet the body at the airport,” Wilson would later tell CNN’s Don Lemon. “So I heard what he said because the phone was on speaker.” Twitter was … not impressed.

While all of this undoubtedly looked bad for the president, it was almost certain that the White House would announce that he didn’t actually say that…

OK, sure; WH spokesperson Sarah Huckabee Sanders might not have denied it, but the president himself certainly did.

How could he have not? After all, it’s the perfect defense for him, considering that the reports had come from a representative of the opposing party. And it’s not as if the widow herself had confirmed the report. Sure, the soldier’s mother did confirm it, but all that really meant was that the back-and-forth was on.

Let’s not forget that the president said he had proof that Wilson was lying. What kind of proof was he talking about?

It would turn out, days later, that there’s apparently an official transcript of the call which, inexplicably, the president’s family has apparently read. But if White House chief of staff John Kelly was present, surely he—a military veteran who has lost his own son in service—would back up the president.

Oh… Good?

The Takeaway: Well, at least the president didn’t speak to any other grieving parents.

Melania, Is That You?

What Happened: As if 2017 wasn’t strange enough already, last week Americans found themselves asking, “What if the First Lady of the United States wasn’t actually the First Lady of the United States?”

What Really Happened: This one is surreal and wonderful. Early last week, the president made a public appearance accompanied by his wife Melania. Except, to some, she didn’t quite look like Melania.

For whatever reason—paranoia, boredom, the sheer glee of starting such a ridiculous meme—the internet quickly embraced the possibility that Melania Trump had been replaced by someone else in public appearances.

Unsurprisingly, mainstream media couldn’t resist joining in on such a dumb, great idea. One report even claimed credit for the Fake Melania idea in general, suggesting that the real deal is currently hiding in “a small town somewhere in Missouri, where she works on a volunteer basis at a center offering counseling and support to refugees and immigrants.” Well, it’s not impossible

The Takeaway: If nothing else, it’s a silly enough idea that people want to believe it.

Here’s Another Clue for You All

What Happened: Sometimes, it might not be the best idea to try and reclaim a meme that involves you being a serial killer.

What Really Happened: Hey, remember that meme that perpetuated the idea that US senator Ted Cruz (R-Texas) was the Zodiac Killer? Well, last week Cruz himself got in on the joke.

…Yes, really. That’s not a mistake, or even the kind of thing that is claimed to be a mistake after the fact; Ted Cruz actually tweeted out a letter from the Zodiac Killer. There is, of course, context for why he did this, but why ruin everything by looking at facts?

Not everyone was a fan of Cruz participating in his own meme, however.

Certainly, while the media was thrilled Cruz was joining in, some believed that he had killed the joke by doing so. Then again, maybe there was an entirely different reason for Cruz to post the meme.

Does he? And how has that worked out for him?

So, yes. It’s all going swimmingly, if that was his intent. Good job, Ted!

The Takeaway: Before we leave Cruz to ponder how much the senator has embarrassed himself here, let’s appreciate the very best response of all.

(Get it? No? Read this.)

Louder Than Bombs

What Happened: In the case of Florida v. Richard Spencer, the Sunshine State came out on top.

What Really Happened: White supremacist, alt-right leader, and punch receiver Richard Spencer had a public appearance at the University of Florida last Thursday. It was certainly something that seemed like a big deal ahead of time, with the state governor declaring a state of emergency before the event, fearful of violent protests. And, sure enough, ahead of the actual appearance, everyone was very aware of the possibility of something going down.

Sure enough, at the event itself, there were protests—but they didn’t go the way anyone expected.

Also: Campus bells played “Lift Every Voice and Sing” as Spencer prepared to take the stage. Only two arrests were made, according to local police, and Spencer was stymied and humiliated.

The Takeaway: Still. White supremacist speech? There has to be a better way to describe that…

Tech

Russian Spies Rush to Exploit the Latest Flash Zero Day and More Security News This Week

There’s nothing like a hefty security freakout to start the week, and the Key Reinstallation AttackWi-Fi vulnerability—you know it as Krack—announced on Monday fit the bill. The bug is in the ubiquitous WPA2 Wi-Fi protocol, so while it fortunately doesn’t impact every single device that exists, it does affect a significant portion of them. And many will likely never receive protective patches, a longstanding and critical security problem that particularly affects the Internet of Things. The relative simplicity of the Krack bug itself also highlights the importance of making technical standards accessible to researchers for review and feedback.

Google announced a new tier of account security this week called Advanced Protection that uses physical authentication tokens, advanced scanning, and siloing to help defend particularly at-risk accounts (or anyone who wants to be very cautious). And after its disastrous corporate breach, Equifax is receiving a thorough public shaming. Researchers also discovered that for just $ 1,000 they can exploit mobile advertising networks to track people’s movements in both cyberspace and the real world. Not great!

US-Iranian relations are tense and could nudge Iran’s cyber operations. And crooks have a new favorite hustle called “cryptojacking” that can secretly use your devices to mine cryptocurrency when you visit infected websites. Highs and lows.

And there’s more. As always, we’ve rounded up all the news we didn’t break or cover in depth this week. Click on the headlines to read the full stories. And stay safe out there.

Flash Patched Its Recent Zero Day, So Russian Hackers Are Using It While They Can

Kaspersky Labs researchers announced a new Adobe Flash vulnerability on Monday, noting that unidentified hackers exploited the bug in an attack on October 10, using a compromised Microsoft Word document to deliver FinSpy malware. Adobe coordinated with Kaspersky to issue a patch on the day of the disclosure. In the wake of the patch, researchers at the security firm Proofpoint observed the hackers doubling down to exploit the flaw before potential targets widely adopt the fix. The group, which Proofpoint says is the Russia-backed collective Fancy Bear, launched an email spearphishing campaign that targeted state departments and aerospace companies. But researchers say the operation was sloppy, and that the group has followed this pattern in the past.

Microsoft Didn’t Disclose 2013 Breach of a Sensitive Vulnerability Database

Sophisticated hackers breached Microsoft’s internal vulnerability-tracking database more than four years ago, but the company didn’t publicly disclose the incident. Five former Microsoft employees told Reuters that the company was aware of the intrusion in 2013. The database would have contained critical vulnerabilities in Microsoft’s widely used software products, including Windows, and may have even included code for exploiting those flaws. Such information would be a gold mine for foreign government-backed hackers or third-party criminals alike, and could have facilitated breaches and espionage at the time.

Reuters’ sources said in separate interviews that Microsoft never connected the breach to any other attacks, and that the company didn’t disclose the incident, because doing so would have pushed attackers to exploit the vulnerabilities before they were patched. Microsoft presumably patched everything in the compromised database years ago, though. Reuters’ sources say that the Microsoft did at least improve its internal security in response to the hack. The incident was part of a rash of attacks that also hit Apple, Facebook, and Twitter. The group behind these hacks is still unidentified, but is known by different researchers as Morpho, Butterfly, and Wild Neutron, and is still active today.

UK Concludes That Iran, Not Russia or North Korea, Hacked Officials’ Email Accounts

Investigators in the United Kingdom concluded last week that Iranian government-backed hackers were behind a June email network intrusion that targeted numerous members of parliament and Prime Minister Theresa May. Every MP uses the network, but the hackers specifically looked for accounts protected by weak passwords or reused ones that had leaked online after other breaches. The parliamentary digital services team told the Guardian that it was making email security changes in response to the attack. The incident underscores Iran’s ongoing digital offensive initiatives. Though the country has been less focused on Western targets in the last few years, it is still an active threat around the world. Recently, US President Donald Trump has worked to undermine the Iran nuclear deal, but Theresa May and other European leaders say they want to preserve it.

Police Did Social Media Surveillance on New York Black Lives Matter Group

The Black Lives Matter Global Network chapter in the Rockland County, New York filed a federal lawsuit in August claiming that local Clarkstown police conducted illegal surveillance on it throughout 2015. Clarkstown police records from the Strategic Intelligence Unit describe social-media surveillance targeted at BLM members. The documents even show evidence that a lead detective told the Strategic Intelligence Unit supervisor to stop the surveillance, but this didn’t end the program. BLM is alleging that Clarkstown police engaged in racial profiling, and violated the group members’ rights to free speech and assembly.

Millions of Crucial Cryptography Keys Weakened By Trusted Generator

A flaw in how a popular code base generates cryptographic keys has ruined the security of millions of encryption schemes. The generator appeared in two security certification standards used my numerous governments and large corporations worldwide, meaning that the flawed keys are meant to protect particularly sensitive platforms and data. German chipmaker Infineon developed the software, which has included the key generating flaw since 2012 or possibly earlier. Attackers could exploit the bug to figure out the private part of a key from its public component. From there they could do things like manipulate digitally signed software, disable other network protections, or, of course, decrypt sensitive data. The situation affects Estonia’s much-touted secure digital ID system. Infineon, Microsoft, and Google warn that the flaw will undermine their Trusted Platform Module products until customers generate new, more robust keys. Estonia has announced plans to update the keys used for its national IDs.

Tech

How Nudge Theory Just Made You Click on This Headline (and Helped a Famous Economist Win the Nobel Prize)

It takes effort to move a mouse, point the arrow toward a headline, and click down on a button. As a writer, I know this is true–I search on Google and read headlines all day, and I write headlines like the one above that will hopefully make you interested.

The catch? We’re all inundated with many other headlines, so there has to be just enough information to make you slightly curious. And, you’re savvy enough to know when a headline is really just a ploy–a trick that’s only a level or two above an ant trap. On the web these days, headlines are all about a demonstration of perceived value. You won’t click unless it seems like there will be an obvious reward and the click will be worth your time.

It’s also a curiously apt example of how nudging works. It’s the power of suggestion, a hint of payback, and a promise of reward for your time all rolled into about 10-15 words. Of course, headlines are nothing new, and suggestions as a way to influence marketing and sales are also not new. What is relatively new, and why Richard Thaler just won the 2017 Nobel prize in economics for his work in this area, is that it has become quite a science.

A headline is a nudge in a pure form. It’s all about prompting people to action–is the promise of the article you’re about to read enough to cause people to act?

For anyone trying to generate content or write a blog, it’s incredibly important to understand the art of nudging. Create too much of a nudge (or too small of a nudge) and people won’t click. A headline has to find the right balance of suggestion versus giving it all away, and the principle applies to an ever greater degree because every headline can be measured so precisely. If you’re writing a headline, it’s worth the effort to think about how the nudge will cause a reaction (or not cause a reaction).

Let’s examine the headline above as an example.

First, you maybe didn’t know about nudge theory. It’s a new concept, so you were curious. It might lead you to discover there’s a book by that name (written by Thaler and a co-author). You might even decide to buy it on Amazon. That’s a big reward right there, because the economic principles of nudging can be invaluable for anyone responsible for product success.

Second, there’s a hint of a new angle. Thaler did just win the Nobel prize, and his accomplishments are worth noting in more ways than one. There’s an interesting correlation that might develop–it must be worth clicking if it was worth winning a Nobel prize. I have no idea if this will actually garner any attention, but I do know that nudging, the Nobel prize, and Thaler are all worth your attention. They might even change how you do marketing.

But it’s the combination of these ideas that I believe is so important, just as it’s a combination of several ideas that make an advertisement enticing, or a PR campaign, or a slideshow you plan to give to an investor. The balance of interest and carrot dangling, to the point where no one even knows there is a carrot involved, is incredibly interesting to me. It’s worthy of an entire book, actually. I’d buy it and read it to find out more–how do you strike the balance? What is the brain science involved that tips people off just the right amount? When is there just enough sugar and when is there too much?

If you know the answers to those questions, you might find some incredible success…with blogging and writing, sure. Or marketing. But also with any business endeavor.

Tech

Space Photos of the Week: This Isn't the Saturn You're Looking For

Behold all the wonders of space with these glorious photos! First up is a two-galaxy collision that formed the system known as Arp 269, captured by the Hubble space telescope. The pair became entangled when galaxy NGC 4490’s gravity drew in the much smaller galaxy NGC 4485 over millions of years. Eventually, they merged becoming one massive star-making event. The celestial neighbors are now slowly drifting apart, but will inevitably collide again.

Hubble also photographed Comet C/2017 K2 PANSTARRS, the farthest active inbound comet ever spotted, located 1.5 billion miles away. The ball of ice and dust traveled millions of years after being tossed from the Oort Cloud, a region known for producing many of our solar system’s comets. The European Space Agency also released comet photos this week with a montage of highlights from the Rosetta space probe. The 210 black-and-white images showcase the many facets of comet 67P/Churyumov–Gerasimenko during Rosetta’s two-year mission.

And finally, the European Space Observatory’s Very Large Telescope captured the stunning Saturn Nebula. While it looks almost nothing like the planet Saturn, the formerly low-mass star does boast glittering rings of dust and gas.

If you’re still not finished admiring the incredible cosmos, check out the entire collection.

Tech

A 13% Yield, Industry Turnaround, And Upside Potential For This Pure-Play LP

Have you ever had to grit your teeth and “hang in there” while one of your holdings works through an industry trough? That’s where we’ve been at with USA Compression Partners LP (USAC) for the past few quarters. As US drilling declined and picked back up, USAC, the leading US pure play compression company, has seen its DCF and distribution coverage falter due to a lagging effect – new compression demand tends to lag increased drilling by a few quarters. Its price/unit also suffered.

Fortunately, USAC has a very supportive general partner, USAC Compression Holdings LLC, which has continued to reinvest 50% of its quarterly distributions in USAC. This has allowed to maintain a “cash distribution coverage ratio” above 1x. (Left column is Q2 ’17; right column is Q1 ’17):

(Source: USAC site)

Here’s how this has played out over the past four quarters – the DCF/Distribution coverage has below 1x, but due to the $ 6M-plus that has been reinvested each quarter, they’ve been able to maintain their $ .525 quarterly payout with a cash coverage ratio averaging 1.055x:

Management reaffirmed it’s 2017 guidance on the Q2 earnings release. We’ve updated this table with the actual distribution figures from Q1-Q2, to compare them to the guidance figures.

If USAC maintains the current level of total distributions, their traditional DCF/Distribution coverage will be in a range of .84x to .95x, according to the DCF guidance range.

However, if their GP continues to reinvest its distributions in Q3 and Q4 ’17, USAC’s cash distribution coverage ratio will be in a 1.06x to 1.20x range.

In this table, we compare the actual Q1-2 ’17 EBITDA and DCF figures vs. the pro-rated 2017 guidance figures. So far in 2017, management has achieved the low end of its guidance in both DCF and EBITDA.

However, there are reasons to believe that this will improve in the second half of 2017 and in 2018, which we’ll detail in the Earnings and Back To The Future sections further on in the article.

Distributions:

USAC’s next distribution should have an ex-dividend date sometime in late July. It pays in the usual Feb/May/Aug/Nov LP cycle. Management has maintained a $ .525 quarterly payout since August 2015, which is 23.53% above its targeted minimum quarterly distribution.

You can track USAC’s price and current yield in the Basic Materials section of our High Dividend Stocks By Sector Tables.

Unit holders get a K-1 at tax time.

Note: Investing in LPs and MLPs may present tax complications when done in an IRA. Additionally, since LPs usually make tax-deferred distributions, you’d reap more tax benefits by holding them in a non-IRA account. At any rate, please consult your accountant about this issue.

Options:

We feature option-selling trades for USAC in our premium subscription service, which we can’t reveal here, but you can see details for over 25 trades in our free Covered Calls and Cash Secured Puts Tables.

Earnings:

In Q2 ’17, EBITDA was down slightly vs. Q2 ’16, while DCF fell -11% due to “some acceleration in maintenance activities during the quarter, as demand for certain idle units in our fleet increased more than expected.”

OK, so DCF was down due to increased demand – not a totally negative scenario – they needed to spend to prepare more machinery for future service.

Sequentially, this was USAC’s best EBITDA figure since Q2 ’16. Fleet utilization was also up, as they noted on the Q2 earnings call: “Our average horsepower utilization for the second quarter was 91.2%, up nicely from 88.2% in Q1, continuing the upward movement of recent quarters.”

“We increased our core compression service revenues by about 5% over the first quarter and achieved a gross margin of over 67%, which was also up from the first quarter.”

Here’s what investors have had to deal with over the past 4 quarters, in return for receiving the steady $ .525/unit quarterly payout – flat revenue, EBITDA down -6%; DCF down -10%; DCF Distribution Coverage down -20%; and unit growth of 12.43%.

Like many of the companies we cover in our articles, USAC has long-term fee-based contracts. Management has also done a good job of keeping bad debt at a minimum, (less than 0.07% over the past 12 years), through partnering with larger, solid counter-parties, and maintaining long-term relationships:

We wouldn’t be braving these headwinds over the past year if it wasn’t for management’s long-term track record of growth – EBITDA CAGR of 15%, Revenue CAGR of 16%, with margins above 50%, (and, of course, the steady distribution).

In addition, USAC has a long history of weathering natural gas cycles. Due to the critical need for its compression services – producers need compression to move natural gas through the pipeline system. This company isn’t going away anytime soon:

Another factor which makes compression services “sticky” over the long term is the profile of natural gas wells in shale plays, which not only need more compression but also tend to have a long 20-year-plus life, after stabilizing.

Management has grown USAC’s asset base considerably, but also made a savvy move in 2016 and 2017 – they cut capex substantially, in response to the downturn:

(Source: USAC site)

Back To The Future:

So, can USAC return to growth, or, at least get to better distribution coverage in the second half of 2017 and in 2018? Management thinks so. On the Q2 earnings call, they said the following:

Looking back on the quarter, we experienced increased activity on the part of our midstream and large E&P customers. This increase in demand has led to tightening in availability of certain types and classes of equipment, leading to increased fleet utilization, both for USA Compression as well as select sector peers. USA’s larger horsepower fleet utilization is now back to levels virtually the same as before the industry decline, in the mid-90% area.”

We also improved visibility regarding demand for our services and corresponding contracting activities, well into 2018. Given this tightness, we have increased the monthly service fees we charge on many types of equipment we use to provide our services.” (Emphasis ours)

During the second quarter, we also saw strong contracting activity, signing new contracts for upwards of a 160,000 horsepower.”

As of the end of the second quarter, we expect to take delivery of approximately 70,000 new-build horsepower in the second half of 2017, part of approximately a 125,000 total horsepower that is already contracted and expected to start in the back half of the year, further increasing utilization as well as revenues and cash flow.”

For 2018, we’ve already contracted to build and take delivery of approximately a 150,000 horsepower throughout the year with the majority already spoken for by our core customers.”

able to see increasing cash flows and increasing activity over the next — the rest of this year and well into 2018. We think we kind of grow back into a coverage level that’s a little more attractive than where we are now.”

Another positive note was that management doesn’t see any more unit dilution in the near future: “We are not looking at any need for equity and we think that the business kind of naturally delevers over the course of the next two, four-plus quarters.” (Source-Q2 earnings call)

Industry Tailwinds:

Management also addressed the changes which have been evolving in the industry on the Q2 earnings call:

“There is a fundamental shift occurring in the oil and gas industry as certain shale plays move from the exploration/exploitation mode into the development mode, driven in many cases by our larger upstream customers. This moment toward massive mining type, manufacturing oriented project results and initial production volumes in many cases approaching those of large offshore production platforms.”

“Our business is driven by natural gas demand and production. As the industry has evolved into these larger projects, our large horsepower fleet sits right in the middle of it all. We continue to see significant activity by our customers, especially in the Permian and Delaware basins, and it is all focused on the very largest compression units in our fleet.”

(Source: USAC site)

What’s causing the increased demand for compression? US producers are adding rigs in key areas – excepting the Marcellus, which was up 73% from the trough, all of the areas listed below had rig counts up by triple digits as of 8/11/17.

(Source: USAC site)

As management noted in the earnings call, “The factors driving natural gas demand and the associated need for increased domestic natural gas infrastructure remain firmly in place – exports to Mexico, LNG exports, industrial demand, and gas-fired electric generation.”

(Source: USAC site)

Risks:

As we noted earlier, USAC isn’t currently covering its distributions in a traditional DCF/distribution model – its general partner, USAC Compression Holdings LLC, has been supporting the distribution by electing to reinvest 50% of its distributions into the company’s DRIP plan, which affords USAC more cash to continue paying out that $ .525 distribution every quarter. If the general partner decides to stop reinvesting in the near term and USAC’s anticipated earnings growth doesn’t emerge, management may be forced to cut the distribution.

Hurricane damage – Hurricane Harvey caused some wells to be shut in within the Eagle Ford area – the net downside is unknown as of yet. “The shut-in wells also have disrupted natural gas pipeline flows into Mexico, one of the biggest purchasers of Eagle Ford gas, and caused prices to spike there.” (Source: mysanantonio.com)

However, a 9/11/17 update from Forbes said that “A variety of midstream companies have provided updates on operations and the punchline is there has been very minimal damage and operations have either restarted or in process of restarting at various facilities. This is consistent for producers, with crude oil and natural gas production coming back on-line as well.” (Source:forbes.com)

Analysts’ Targets:

USAC is now 12.6% below analysts’ current $ 17.60 price target, and 28% below the $ 20.00 high price target.

Valuation:

USAC’s 13.44% yield dwarfs the Oil & Gas Equipment & Services industry’s average 1.67% yield, while its Price/Book is considerably lower.

Financials:

The industry isn’t known for high ROA and ROE figures – the amount of heavy equipment needed implies a large depreciation and amortization charge vs. net income, which makes USAC’s tiny ROA and ROE figures look good by comparison. Its Operating Margin is also much higher than broad industry averages, while its Debt/Equity level is much lower.

Debt and Liquidity:

Management commented on current leverage on the Q2 earnings call – “Outstanding borrowings under our revolving credit facility as of quarter-end were $ 725 million, resulting in a leverage ratio of 4.94 times, consistent with the first quarter and well within our covenant level of 5.5 times.”

The $ 1.1B credit facility matures in 2020. They had ~ $ 375M available as of 6/30/17.

(Note: we used trailing EBITDA to derive a 5.04x ratio, whereas management uses Q2’s EBITDA annualized vs. debt, to come up with their 4.94x figure.)

Summary:

We continue to rate USAC a long-term buy. This is a company which has weathered numerous Energy cycles, and we feel that they will do so once again. Meanwhile, income investors receive a very attractive quarterly payout.

All tables furnished by DoubleDividendStocks.com, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and isn’t intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

Disclosure: I am/we are long USAC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Tech

This Electric Bus Can Travel 1,100 Miles Without Recharging

A 40-foot (12.19-meter) electric bus from Proterra traveled 1,101.2 miles (1,772.21 km) at low speed without recharging, cruising to a new electric vehicle range record, the California manufacturer said on Tuesday.

Bus and truck companies are beginning to launch electric models, typically for light- and medium-duty tasks. The new technology often carries a high price, though, and a major challenge is creating vehicles with acceptable range at a competitive price.

A typical Proterra bus costs around $ 750,000 compared with roughly $ 500,000 for a typical diesel bus, chief commercial officer Matt Horton said in an interview. Proterra has lower operating costs but must convince customers that the higher sticker price is worth paying.

“Heavy-duty electric transit vehicles now have the capabilities they need. We will be turning our focus even more so to driving the cost down,” he said.

While battery weight is seen as a problem for heavy-duty trucks, eating into cargo capacity, Horton said that a bus is much lighter than a loaded big rig, even with a full complement of passengers.

Proterra developed the battery for its bus with Korea’s LG Chem. The bus maker has begun assembling battery packs at a new factory in Burlingame, California. It sold 190 buses last year and is on track to “far exceed” that this year, Horton said.

Navistar Proving Ground confirmed the single-charge trip, at 15 miles per hour. Proterra said it set the record earlier this month and beat a previous record of 1,013 miles by a light-duty passenger vehicle.

Tech

Robots Replacing Developers? This Startup Uses Artificial Intelligence To Build Smart Software

The role of technology within our personal and professional lives continues evolving at an exceptionally fast pace. From utility-based mobile apps and wearable devices, to the emergence of augmented and virtual reality, the digital revolution is expanding to cover every aspect of the human experience.


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Did Prehistoric People Watch the Stars Through This 6,000 Year Old ‘Telescope’?

Prehistoric humans may have observed the sky via primitive lens-less “telescopes,” according to a team of British astronomers who have studied the long passageways of ancient megalithic tombs. The details were presented today by Kieran Simcox, a student at Nottingham Trent University, at a meeting of the Royal Astronomical Society.

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Silicon Valley’s Hottest Startup Incubator Takes On This Indian Venture

Just one year ago, Indian e-coupon aggregator LafaLafa.com was barely a blip in the mind of, well, anyone. It’s been quite the year though – testament to the booming tech environment in India, they’re one of the privileged few to be on their way to be accelerated by one of Silicon Valley’s hottest startup incubators.


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I’m Mike Rowe, Host of Somebody’s Gotta Do It, and This Is How I Work

For years Mike Rowe has been traveling across the country to meet people whose laborious, often thankless work keeps the world moving forward. And across different shows and different television networks, what has remained consistent is Mike’s sincere curiosity and willingness to learn.

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This Guy Makes Art Out of Sloppy Photoshop Disasters

People spend years mastering the tools of Photoshop. They labor arduously to create seamless images with no trace of manipulation. Lucas Blalock labors arduously as well. But in his art, the artifacts of cutting, duplicating, and transforming become the very backbone of the finished product.

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Bring your company’s ‘dark data’ to light with this free new tool from Tamr

All the analytics tools in the world won’t do a company much good if it doesn’t know what data it has to analyze. Tamr offers a free, downloadable tool designed to help tackle that “dark data” problem.

Dark data generally refers to all the information an organization collects, processes and stores but doesn’t use for analytics or other purposes. It’s often unstructured or qualitative data that’s harder to keep track of than numerical data is, and by research firm IDC’s reckoning, it can account for as much as 90 percent of an organization’s information assets.

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This Batshit Crazy Company Wants to Build Mobile Private Islands

Yachts are for chumps. People who really know how to spend their money get submersible yachts from Migaloo, a mysterious company that offers five different models of underwater palaces. But true evil villains just go for the Migaloo’s crown jewel: Kokomo Ailand.

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Bring your company’s ‘dark data’ to light with this free new tool from Tamr

All the analytics tools in the world won’t do a company much good if it doesn’t know what data it has to analyze. Tamr offers a free, downloadable tool designed to help tackle that “dark data” problem.

Dark data generally refers to all the information an organization collects, processes and stores but doesn’t use for analytics or other purposes. It’s often unstructured or qualitative data that’s harder to keep track of than numerical data is, and by research firm IDC’s reckoning, it can account for as much as 90 percent of an organization’s information assets.

To read this article in full or to leave a comment, please click here


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