We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Rig Utilization Drive Transocean's (RIG) Q3 Earnings?
Read MoreHide Full Article
Transocean Ltd. (RIG - Free Report) is expected to release third-quarter 2018 results after the close of trading on Monday, Oct 29. The current Zacks Consensus Estimate for the quarter under review is a loss of 9 cents on revenues of $777.9 million.
In the preceding three-month period, the offshore drilling powerhouse beat the consensus mark by 76.5% due to higher-than-anticipated revenues from the ultra-deepwater floaters.
As far as earnings surprises are concerned, the Switzerland-based rig supplier is on a firm footing, having gone past the Zacks Consensus Estimate thrice in the last four reports. This is depicted in the graph below:
Investors are keeping their fingers crossed and hoping that the company can continue winning ways by surpassing earnings estimate this time around too. However, our model indicates that Transocean might not beat on earnings in the third quarter.
Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
While higher and stable oil prices have led to improving contract visibility and dayrates, fundamentals for floater players like Transocean still appear vague. Investors should know that the company is now exclusively focused on the floaters segment following the sale of its entire jack-up fleet to Borr Drilling in 2017.
As a proof of the tepid industry dynamics, the Zacks Consensus Estimate for third-quarter contract drilling revenue for ultra-deepwater floaters, which makes up more than half of total revenues, is pegged at $430 million, below the $470 million reported in the previous quarter and the third-quarter 2017 sales of $511 million.
Over the past few quarters, the company is also bogged down by operational inefficiencies which are hurting its margins. Transocean’s operating and maintenance expenses rose 30.2% to $431 million year over year in the last reported quarter. Further, rig reactivation and scrapping costs are likely to weigh down on the company's margins in the coming periods as well. In fact, the company expects operating and maintenance expenses to creep up to $435 million in the third quarter.
However, on a somewhat encouraging note, the Zacks Consensus Estimate for harsh-environment floaters sales is pegged at $285 million, higher than $252 million reported in the previous quarter and above the third-quarter 2017 sales of $106 million. The harsh-environment floaters are the Transocean’s second-biggest contributor to sales.
The pick-up in rig utilization is another positive for the company. Overall fleet utilization was 57% during the second quarter, up from the 44% and 52% recorded in the year-ago quarter and first quarter, respectively. The rig utilization is expected to improve further in the coming quarters as demand for oil grows and higher realizations bring back the offshore drillers again.
What Does Our Model Say?
Our proven model too does not conclusively predict that Transocean will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -14.93%.
Zacks Rank: Transocean currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks to Consider
While earnings beat looks uncertain for Transocean, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
Apache Corporation (APA - Free Report) has an Earnings ESP of +1.32% and a Zacks Rank #2. The company is expected to release earnings on Oct 31.
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 1.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Will Rig Utilization Drive Transocean's (RIG) Q3 Earnings?
Transocean Ltd. (RIG - Free Report) is expected to release third-quarter 2018 results after the close of trading on Monday, Oct 29. The current Zacks Consensus Estimate for the quarter under review is a loss of 9 cents on revenues of $777.9 million.
In the preceding three-month period, the offshore drilling powerhouse beat the consensus mark by 76.5% due to higher-than-anticipated revenues from the ultra-deepwater floaters.
As far as earnings surprises are concerned, the Switzerland-based rig supplier is on a firm footing, having gone past the Zacks Consensus Estimate thrice in the last four reports. This is depicted in the graph below:
Transocean Ltd. Price and EPS Surprise
Transocean Ltd. Price and EPS Surprise | Transocean Ltd. Quote
Investors are keeping their fingers crossed and hoping that the company can continue winning ways by surpassing earnings estimate this time around too. However, our model indicates that Transocean might not beat on earnings in the third quarter.
Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
While higher and stable oil prices have led to improving contract visibility and dayrates, fundamentals for floater players like Transocean still appear vague. Investors should know that the company is now exclusively focused on the floaters segment following the sale of its entire jack-up fleet to Borr Drilling in 2017.
As a proof of the tepid industry dynamics, the Zacks Consensus Estimate for third-quarter contract drilling revenue for ultra-deepwater floaters, which makes up more than half of total revenues, is pegged at $430 million, below the $470 million reported in the previous quarter and the third-quarter 2017 sales of $511 million.
Over the past few quarters, the company is also bogged down by operational inefficiencies which are hurting its margins. Transocean’s operating and maintenance expenses rose 30.2% to $431 million year over year in the last reported quarter. Further, rig reactivation and scrapping costs are likely to weigh down on the company's margins in the coming periods as well. In fact, the company expects operating and maintenance expenses to creep up to $435 million in the third quarter.
However, on a somewhat encouraging note, the Zacks Consensus Estimate for harsh-environment floaters sales is pegged at $285 million, higher than $252 million reported in the previous quarter and above the third-quarter 2017 sales of $106 million. The harsh-environment floaters are the Transocean’s second-biggest contributor to sales.
The pick-up in rig utilization is another positive for the company. Overall fleet utilization was 57% during the second quarter, up from the 44% and 52% recorded in the year-ago quarter and first quarter, respectively. The rig utilization is expected to improve further in the coming quarters as demand for oil grows and higher realizations bring back the offshore drillers again.
What Does Our Model Say?
Our proven model too does not conclusively predict that Transocean will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -14.93%.
Zacks Rank: Transocean currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks to Consider
While earnings beat looks uncertain for Transocean, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
CNX Resources Corporation (CNX - Free Report) has an Earnings ESP of +10.47% and a Zacks Rank #2 (Buy). The company is anticipated to release earnings on Oct 30. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apache Corporation (APA - Free Report) has an Earnings ESP of +1.32% and a Zacks Rank #2. The company is expected to release earnings on Oct 31.
NOW Inc. (DNOW - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 1.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
See This Ticker Free >>