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Ensco (ESV) Down 2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Ensco . Shares have lost about 2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ensco 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 catalysts.

Ensco Loss in Q4 Wider than Expected, Revenues Down Y/Y

Ensco plc reported adjusted fourth-quarter 2018 loss of 39 cents a share, wider than the Zacks Consensus Estimate of a loss of 38 cents and the year-ago loss of 23 cents.

Total revenues amounted to $399 million, down from $454.2 million in the year-ago quarter. The top line also missed the Zacks Consensus Estimate of $401.6 million.

The company’s results were impacted by lower utilization for the floater fleet, decreasing realized dayrates and higher depreciation costs. These factors were partially offset by the addition of four rigs to the active fleet.

Segmental Performance

Floaters: Revenues came in at $227.8 million compared with $302.8 million in the prior-year quarter. The downside was primarily due to the sale of ENSCO 6001. Decline in average day rate to $258,759 from $306,937 in the year-ago quarter also attributed to the revenue decline.

Reported utilization was 40%, down from the year-ago quarter’s 44%. Adjusted for rigs that are not under contract and planned downtime, operational utilization was 97%, in line with the prior-year quarter.

Jackups: Revenues totaled $155.5 million compared with $136.5 million in the prior-year period, as reported utilization rose to 62% from 54% in fourth-quarter 2017. Moreover, average day rates marginally rose to $76,222 from $76,037 in the prior-year quarter. However, adjusted for uncontracted rigs and planned downtime, operational utilization in the reported quarter was 97% compared with 98% in the year-ago period.

Other: Revenues increased to $15.7 million from $14.9 million in fourth-quarter 2017. Contract drilling expenses rose to $13.4 million from $12.9 million in the year-ago quarter.

Costs and Expenses

Depreciation expenses jumped to $122.4 million from $119.5 million in fourth-quarter 2017. This was due to the inclusion of four rigs to the active fleet. General and administrative expenses fell to $23.6 million from $70.9 million in the prior-year quarter. Overall contract drilling expenses fell 3% from the prior-year quarter to $322.8 million.

Balance Sheet

At the end of the fourth quarter, Ensco had $275.1 million in cash and cash equivalents. Long-term debt (including current maturities) was $5,010.4 million, with net debt-to-capitalization ratio of 38.2%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -17.5% due to these changes.

VGM Scores

At this time, Ensco has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Ensco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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