Is RPC Stock Attractive as Margin Gains Meet Soft Industry Activity?

RPC, Inc. RES is improving profitability while oilfield activity remains subdued. Second-quarter 2026 revenues rose only 1% sequentially to $460.9 million, but better job mix, selective pricing and operating leverage lifted adjusted EBITDA materially.

The investment case therefore rests on execution rather than a broad industry rebound. A more diversified service portfolio and discounted sales valuation support the case, while competitive pricing, soft activity and higher capital spending keep the risk-reward balance measured.

RPC's Service Mix Reduces Pumping Reliance

RPC has shifted toward lower-capital-intensity businesses.In the second quarter of 2026, pressure pumping accounted for 30.3% of RPC’s revenues, while downhole tools, wireline, coiled tubing, cementing and rental tools together represented about 63% of revenues, reflecting the company’s broader service mix and reduced reliance on its most capital-intensive business.

Support Services revenues increased 11% sequentially in the second quarter to $22.8 million. Rental Tools led the improvement with 21% growth, while downhole tools revenues rose 10%, adding another source of diversification.

RES Margin Gains Strengthen the Operating Case

Adjusted EBITDA increased 23.3% sequentially to $66 million in the second quarter, while the adjusted EBITDA margin expanded 250 basis points to 14.3%. Better job mix, modest pricing improvements and operating leverage at several locations supported the gain.

Technical Services operating income increased 73% sequentially to $27.6 million. Management's focus remains on full-cycle returns rather than adding capacity merely to lift utilization, an approach that is particularly relevant while industry demand remains restrained.

RPC's Valuation Sends a Mixed Signal

RES trades at 0.76X forward 12-month sales, below the Zacks sub-industry's 1.46X and its own five-year median of 0.83X. That discount gives the stock a clearer value case on sales.

Image Source: Zacks Investment Research

The earnings comparison is less favorable. RES carries a forward price-to-earnings ratio of 23.8 compared to 20.0 for the sub-industry, indicating that the sales discount does not translate into an equally inexpensive earnings valuation.

Image Source: Zacks Investment Research

RES Cash Flow Faces a Higher Capex Burden

Operating cash flow declined to $74.6 million in the first half of 2026 from $92.9 million a year earlier. Free cash flow fell to $3.8 million from $17.6 million as working capital absorbed cash.

Management now expects 2026 capital expenditures of $170-$190 million, reflecting targeted growth investments. RPC's $179.5 million cash balance and lack of revolver borrowings provide flexibility, but sustained soft activity could keep free cash flow under pressure.

RES Earnings Estimates Point to Modest Growth

RPC’s earnings estimates suggest that improving operating execution may not translate into a sharp near-term acceleration in profits. The Zacks Consensus Estimate for the current quarter is 9 cents per share, flat from the year-ago period, indicating limited immediate earnings growth despite recent margin improvement. The next-quarter estimate of 5 cents per share implies 25%, but the increase comes off a relatively low base of 4 cents per share.

For 2026, the consensus estimate of 26 cents per share represents only 4% growth from 25 cents in 2025, while the 2027 estimate of 27 cents per share points to a further 3.9% increase. This modest annual growth trajectory is consistent with the pressure from subdued industry activity highlighted in the broader investment case.

Image Source: Zacks Investment Research

RPC Industry Risks Could Limit the Upside

The average U.S. rig count was 554 in the second quarter, down 3%, and management does not expect a significant near-term activity change. Pintail Wireline revenues fell 16% sequentially amid lower customer activity and aggressive competitor pricing.

Scale also matters as customers consolidate. Halliburton Company HAL operates a broad Completion and Production business that includes pressure pumping and completion tools. SLB N.V. SLB also spans well construction and production systems, underscoring the competitive breadth of larger oilfield-service providers.

RPC Signals Favor Value Over Growth

RPC's operating gains and sales-based discount improve the near-term setup, but subdued activity and a heavier investment program limit visibility into faster earnings and cash-flow growth. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

RES also has a Value Score of A, Growth Score of C, Momentum Score of B and VGM Score of A. The combination points to favorable value and momentum characteristics, while the middling Growth Score is consistent with a less forceful growth profile.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research