Archrock, Inc. (AROC)
NYSEEnergyOil & Gas Equipment & ServicesSnapshot 2026-09-09
$32.96-1.20%
Close 2026-09-09 · 1-day change
NYSEEnergyOil & Gas Equipment & ServicesSnapshot 2026-09-09
Broken: Primary pillar broken — Contract operations gross margin near 72%: 46.6% vs 70%.
Archrock grew revenue 7% year over year in Q1 2026. Profit margin rose to 72% in contract operations. Free cash flow turned positive to $91.9 million in Q1. The company cut expensive debt and raised dividends by 16%.
Revenue growth could slow below 6% next year. Profit margins might fall under 70%. Free cash flow could weaken again. Debt costs might rise if capital management falters.
The price is about 13% above our fair value near $33. Analysts expect 6% revenue growth. Our fair value is 19% below the Street median near $41. We see moderate risks to growth and margins.
Breaks if: Fails to redeem high-cost debt or cut dividends in FY26
Continue disciplined capital allocation with focus on debt reduction and maintaining strong balance sheet.
This is not a price target or investment advice.
A long-form read on the 1–3 year hold thesis. It updates when the weekly evidence changes.
This investment represents a durable compounder in the energy sector. The current thesis state is intact, supported by strong recent financial performance and management's focus on growth and profitability.
The market appears to have priced in a neutral valuation, reflecting a low expectations gap. AROC is seen as cheap compared to its peers, but the overall sector context has weakened recently.
Management is on track with priorities to grow revenue and improve margins, as evidenced by recent financial results. However, there is a moderate risk from the potential for earnings misses, which have occurred consecutively.
The thesis hinges on several factors, including inflation trends and guidance from management. Additionally, the performance of sector bellwethers like SLB, BKR, and FTI will be crucial for maintaining momentum.
The most important moves since the prior daily snapshot.
Mixed, the news cuts both ways. A recent contract win and dividend increase support revenue growth. However, the latest earnings miss raises concerns about future performance.
as of 2026-09-09
Review the evidence to watch, what would become a concern, and what would make it less concerning.
Not investment advice. Scores describe historical and current data; they are not forecasts of future returns. Consult a licensed advisor before making investment decisions.
Stated in 3 of last 3 quarters. Management maintained disciplined capital allocation, including redeeming $800M senior notes in 2026-Q2 and issuing $800M new notes in 2026-Q1. Leverage ratio improved from 3.3x in 2025-Q2 to 2.6x in 2026-Q2. This shows delivery on debt management and capital discipline.
“On April 1, 2026, we repurchased our $800M of 6.25% senior notes due 2028.”
“Completed private offering of $800M senior notes due 2034 and repaid borrowings under credit facility.”
“Announced intention to redeem all $800M senior notes due 2028 on April 1, 2026.”
Increase dividends and execute share repurchases to return capital to shareholders.
Stated in 2 of last 2 quarters. Dividends per share increased from $0.21 in 2025-Q2 to $0.23 in 2026-Q2, with dividend coverage remaining above 3x. Share repurchases totaled $4.4M in 2026-Q1, with $113.2M capacity remaining. Management's focus on returning capital is reflected in dividend increases and ongoing repurchase program, indicating delivery.
“Declared quarterly dividend of $0.23 per share, approximately 10% higher than 2025-Q2.”
“Declared quarterly dividend of $0.22 per share, approximately 16% higher than 2025-Q1.”
Breaks if: free cash flow falls below zero in FY26
Grow cash generated from operating activities and free cash flow to support dividends and capital allocation.
Stated in 2 of last 2 quarters. Net cash from operating activities rose from $127.5M in 2025-Q2 to $160.8M in 2026-Q2, and adjusted free cash flow improved from negative $48.4M in 2025-Q1 to $91.9M in 2026-Q1. Management's emphasis on growing free cash flow aligns with these improvements, indicating delivery on this priority.
“Net cash provided by operating activities was $160.8M in 2026-Q2, compared to $127.5M in 2025-Q2.”
“Net cash provided by operating activities was $185.9M in 2026-Q1, compared to $115.6M in 2025-Q1.”
Breaks if: gross margin falls below 70% in FY26
Sustain and enhance operating income and adjusted gross margins through operational efficiency and cost management.
Stated in 2 of last 2 quarters. Contract operations adjusted gross margin percentage improved from 70% in 2025-Q2 to 71% in 2026-Q2, and operating income increased from $91.9M in 2025-Q1 to $97.7M in 2026-Q1. Management's focus on operational reliability and profitability is reflected in stable to improving margins and income, indicating delivery.
“Adjusted gross margin percentage for contract operations was 71% in 2026-Q2, compared to 70% in 2025-Q2.”
“Adjusted gross margin percentage for contract operations was 72% in 2026-Q1, compared to 70% in 2025-Q1.”
Breaks if: YoY revenue growth falls below 6% in FY26
Focus on growing revenue and profitability through strong contract operations and high utilization of horsepower fleet.
Stated as a priority in 2 of last 2 quarters. Contract operations revenue grew from $318.3M in 2025-Q2 to $329.3M in 2026-Q2 (+3%), with total operating horsepower slightly declining from 4.7M to 4.5M but utilization remaining high. Management emphasizes strong utilization and profitability, indicating delivery on this priority.
“Our Contract Compression business continues to perform at a high level, supported by strong utilization, outstanding profitability and a healthy order book.”
“Our contract operations fleet has delivered full utilization over a multi-year period, and profitability continues to benefit from strong execution.”
Overall, AROC's fundamentals are strong, but the company faces risks that could impact its performance. Not investment advice.