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Rowan Companies (RDC) Down 22% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Rowan Companies PLC . Shares have lost nearly 22% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Fourth-Quarter 2016 Results

Rowan Companies reported adjusted fourth-quarter 2016 earnings from continuing operations of $0.08 per share. The Zacks Consensus Estimate was of a loss of $0.06 per share. The outperformance was supported by a considerable fall in total expense, partially offset by lower rig utilization. However, the bottom line deteriorated significantly from the year-ago quarter profit of 95 cents per share.

Total revenue was $351.8 million in the fourth quarter as against $535.8 million in the prior-year quarter. However, the top-line beat the Zacks Consensus Estimate by 2.3%.

Dayrates and Utilization 

The company's deepwater rigs had a dayrate of $464,500 compared with $623,300 in the year-ago quarter. Jackup rigs saw a dayrate of $156,600 as against $176,300 in the prior year.

The overall dayrate of all rigs was $207,600 compared with $250,100 in fourth-quarter 2015. Average utilization of the company's rigs was 65% as against 80% in the comparable quarter last year.

Total Expenses

During the quarter, the company reported $310.6 million in costs as against $355.6 million in the year-ago comparable period.

Financials

As of Dec 31, 2016, the company's cash balance was $1,255.5 million and long-term debt (including current maturities) was $2,553.4 million. The long term debt-to-capitalization ratio was 33.3%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been five downward revisions for the current quarter compared to one upward. In the past month, the consensus estimate also shifted downward by 32.1% due to these changes.

Rowan Companies PLC Price and Consensus

 

Rowan Companies PLC Price and Consensus | Rowan Companies PLC Quote

VGM Scores

At this time, Rowan Companies' stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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