Is U.S. Silica (SLCA) Poised to Beat Earnings Estimates?

U.S. Silica Holdings, Inc. SLCA is set to release its third-quarter 2014 results before the opening bell on Wednesday, Oct 29.

In the last quarter, the producer of commercial silica delivered a roughly 19.6% positive earnings surprise. This came on the back of solid demand from its main markets, oil and gas, which drove  the performance at both of its operating units. Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

U.S. Silica posted strong second-quarter 2014 results. Robust demand from oil and gas customers led to a 27% year over year increase in volumes to a record 2.6 million tons. Increased volumes along with imporved pricing in turn led to record revenues of $206 million, a 59% year over year improvement.

U.S. Silica has also undertaken some long-term supply contracts to drive its business in the future. During the second quarter, the company had signed four take-or-pay supply contracts and modified one with terms expiring between 2015 and 2019. It is the new pricing under these contracts that will ensure good returns from its businesses.

Moreover, these contracts are likely to generate higher volumes by enabling the company to serve its customers better and expand its business. U.S. Silica is also striving hard to keep pace with increasing customer demand.

U.S. Silica signed a mining and development contract with the town of Fairchild, WI. Additionally, the company had closed the acquisition of Cadre Services on Jul 31. This acquisition is in line with the company's strategy to grow its market share and expand its footprints and products portfolio.

U.S. Silica has raised its full-year 2014 guidance during the second quarter conference call. The company expects its 2014 EBITDA in the range of $215 million to $225 million, including a small contribution from the Cadre acquisition.

Earnings Whispers

Our proven model shows that U.S. Silica has the right combination of two key ingredients to beat earnings this season.

Zacks ESP: U.S. Silica has an Earnings ESP of +4.41% — the difference between the Most Accurate Estimate of 71 cents and the Zacks Consensus Estimate of 68 cents. This indicates a likely positive earnings surprise.

Zacks Rank: U.S. Silica's Zacks Rank #2 (Buy) increases the predictive power of its ESP. Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks That Warrant a Look

Here are some other companies in the mining sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Cameco Corp. CCJ has an Earnings ESP of +40% and a Zacks Rank #3 (Hold).

HudBay Minerals, Inc. HBM has an Earnings ESP of +33.33% and a Zacks Rank #3 (Hold).

Newmont Mining Corp. NEM has an Earnings ESP of +11.11% and a Zacks Rank #3 (Hold).

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