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Transocean (RIG) Down 14.3% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Transocean Ltd. (RIG - Free Report) . Shares have lost about 14.3% 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 the most recent earnings report in order to get a better handle on the important drivers.
Fourth-Quarter 2016 Results
Transocean reported stronger-than-expected fourth-quarter 2016 results, buoyed by solid revenue efficiency and cost control initiatives. In particular, the company achieved another quarter of outstanding revenue efficiency at 100.3%, up from 95.9% a year ago.
Earnings per share (excluding special items) came in at $0.63, significantly ahead of the Zacks Consensus Estimate of $0.04.
However, the bottom line decreased from the year-ago adjusted earnings of $1.68 per share amid reduced activity and lower dayrates.
Total quarterly revenues of $974 million were down 47% year over year but surpassed the Zacks Consensus Estimate of $786 million.
Transocean’s high-spec floaters contributed about 71% to total revenue, while mid-water floaters and high specification jackups accounted for 3% and 7% of the total, respectively. The remaining revenue came from other rig activities, integrated services and others.
Operating Statistics
Transocean earned operating profit of $339 million during the quarter, compared to $750 million in the year-ago period. The decline primarily reflects sharply lower contract drilling revenues.
However, Transocean was able to reduce its operating and maintenance expenses by an impressive 60% to $314 million. The cost discipline, coupled with lower capital expenditure, enabled the company to generate $633 million in cash flow from operating activities.
Dayrates and Utilization
Compared to the fourth quarter of 2015, dayrates fell 22% (from $422,800 to $329,400), unfavorably impacted by declines in all types of rigs.
Overall fleet utilization was 46% during the quarter, down from the year-ago utilization rate of 60%.
Capital Expenditure & Balance Sheet
While Transocean spend $665 million as capital expenditure in the fourth quarter of 2015, the amount came down sharply to just $272 million during the three months under review. Lion’s share of this $272 million went toward the newbuild program.
As of Dec 31, 2016, Transocean had cash and cash equivalents of $3,052 million.
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 two upward. In the past month, the consensus estimate also shifted downward by 27.3% due to these changes.
At this time, Transocean's stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'D'. The stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. 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 suitable solely for value 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 looking for an inline return from the stock in the next few months.
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Transocean (RIG) Down 14.3% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Transocean Ltd. (RIG - Free Report) . Shares have lost about 14.3% 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 the most recent earnings report in order to get a better handle on the important drivers.
Fourth-Quarter 2016 Results
Transocean reported stronger-than-expected fourth-quarter 2016 results, buoyed by solid revenue efficiency and cost control initiatives. In particular, the company achieved another quarter of outstanding revenue efficiency at 100.3%, up from 95.9% a year ago.
Earnings per share (excluding special items) came in at $0.63, significantly ahead of the Zacks Consensus Estimate of $0.04.
However, the bottom line decreased from the year-ago adjusted earnings of $1.68 per share amid reduced activity and lower dayrates.
Total quarterly revenues of $974 million were down 47% year over year but surpassed the Zacks Consensus Estimate of $786 million.
Transocean’s high-spec floaters contributed about 71% to total revenue, while mid-water floaters and high specification jackups accounted for 3% and 7% of the total, respectively. The remaining revenue came from other rig activities, integrated services and others.
Operating Statistics
Transocean earned operating profit of $339 million during the quarter, compared to $750 million in the year-ago period. The decline primarily reflects sharply lower contract drilling revenues.
However, Transocean was able to reduce its operating and maintenance expenses by an impressive 60% to $314 million. The cost discipline, coupled with lower capital expenditure, enabled the company to generate $633 million in cash flow from operating activities.
Dayrates and Utilization
Compared to the fourth quarter of 2015, dayrates fell 22% (from $422,800 to $329,400), unfavorably impacted by declines in all types of rigs.
Overall fleet utilization was 46% during the quarter, down from the year-ago utilization rate of 60%.
Capital Expenditure & Balance Sheet
While Transocean spend $665 million as capital expenditure in the fourth quarter of 2015, the amount came down sharply to just $272 million during the three months under review. Lion’s share of this $272 million went toward the newbuild program.
As of Dec 31, 2016, Transocean had cash and cash equivalents of $3,052 million.
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 two upward. In the past month, the consensus estimate also shifted downward by 27.3% due to these changes.
Transocean Ltd. Price and Consensus
Transocean Ltd. Price and Consensus | Transocean Ltd. Quote
VGM Scores
At this time, Transocean's stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'D'. The stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. 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 suitable solely for value 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 looking for an inline return from the stock in the next few months.