Select Water 2025 Q1 Earnings Strong Growth as Net Income Surges 146.7%

Select Water (WTTR) reported its fiscal 2025 Q1 earnings on May 07th, 2025. The company exceeded expectations with a net income surge of 146.7% over the previous year. Additionally, the guidance for the upcoming quarters appears optimistic, reflecting the company's strategic expansion and contract wins. Anticipated growth in recycling and disposal volumes in Q2 2025 suggests a positive outlook, while challenges in the latter half of the year are mitigated by a robust asset base in the Permian Basin.

Revenue
Select Water's total revenue increased by 2.1% to $374.38 million in Q1 2025, compared to $366.55 million in Q1 2024. The Water Infrastructure segment generated $72.39 million, while Water Services contributed $225.65 million. Chemical Technologies added $76.34 million to the total revenue, showcasing the company's diversified income streams.

Earnings/Net Income
Select Water's earnings per share doubled to $0.08 in Q1 2025 from $0.04 in Q1 2024, reflecting continued growth. Net income rose substantially to $9.56 million, marking a 146.7% increase from the previous year's $3.88 million, highlighting a robust financial performance.

Price Action
The stock price of Select Water has tumbled 11.08% during the latest trading day, has tumbled 14.32% during the most recent full trading week, and has plummeted 16.38% month-to-date.

Post-Earnings Price Action Review
Investors adopting a strategy of purchasing Select Water (WTTR) shares after a quarterly revenue decline and holding for 30 days witnessed a modest 4.28% return, which significantly underperformed the benchmark's 84.08% return. This approach, with a compound annual growth rate of 0.84%, involved considerable risk given its maximum drawdown of -27.51%, and a Sharpe ratio of 0.04, indicating low returns relative to risk. Despite the strategy's underperformance, it highlights the volatility and potential pitfalls of short-term trading strategies. This performance underscores the challenges faced by investors attempting to capitalize on short-term fluctuations in Select Water's stock price, emphasizing the importance of considering long-term growth prospects and strategic developments in the company’s operations.

CEO Commentary
John Schmitz, Chairman of the Board, President, and CEO, emphasized a strong start to 2025, noting a sequential net income increase of $11.7 million and a 14% rise in adjusted EBITDA. He acknowledged revenue and gross profit declines in the Water Infrastructure segment due to legacy freshwater pipeline assets but maintained that gross margins remained robust at 54%. Schmitz expressed confidence in the company’s portfolio of long-term contracts and expansion in the Permian Basin, projecting sustained growth.

Guidance
Select Water anticipates continued growth with increased recycling and disposal volumes expected in Q2 2025. Despite potential macroeconomic pressures possibly affecting activity levels later in the year, the company is well-positioned with its expanding asset base in the Permian Basin. With a target of over 1.3 million barrels per day of recycling throughput capacity in the Northern Delaware Basin, Select Water is optimistic about long-term revenue growth, supported by strategic contract expansions and infrastructure investments.

Additional News
Select Water Solutions has been actively expanding its water infrastructure projects in the Permian Basin. Recently, the company announced an 11-year contract to enhance its infrastructure network in the Northern Delaware Basin of New Mexico, involving significant capital deployment. Furthermore, Select Water acquired two disposal wells in the Midland Basin, bolstering its disposal capacity by 35,000 barrels per day. These strategic moves are aimed at strengthening Select Water's footprint in the region, aligning with its long-term growth strategy. Additionally, the company finalized a partnership with AV Farms, LP, investing in water rights in Colorado's Arkansas River Valley, enhancing its water resource capabilities.