Global offshore drilling contractor Transocean Ltd. ( RIG - Analyst Report ) reported better-than-expected second-quarter 2012 results on August 1, 2012, with both revenue and earnings per share improving year over year.

We cover below the results of the recent earnings announcement, subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.

Second Quarter Recap

The quarter’s earnings per share (excluding transaction costs) came in at 72 cents, significantly ahead of the Zacks Consensus Estimate of 44 cents and the year-ago adjusted profit of 50 cents.

Quarterly revenue of $2,575.0 million were up 10.3% year over year and also surpassed the Zacks Consensus Estimate by 3.7%, mainly fueled by better efficiency on high-spec floaters and a dip in the number of shipyard days.

Agreement of Analysts

Looking at the estimates’ revision trend, it becomes clear that most of the analysts project a mixed outlook for Transocean through the balance of 2012.

Of the total 19 analysts covering the stock, 4 have raised their estimates and 13 have moved in the opposite direction over the last 30 days. In the last 7 days, two analysts revised the estimates downward, while none increased.

For fiscal 2012, 8 analysts (out of 18 covering the stock) have upped their estimates in the last 30 days, while 3 analysts went for downward revisions. However, over the last 7 days, only one analyst decreased the earnings estimate, as against no upward revision.

The estimate revisions for the upcoming quarter and full-year 2012 indicate the analysts’ sentiment based on the company’s technologically-advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power. However, the not-so-favorable oil and natural gas market conditions along with operational issues – such as fluctuating dayrates and high costs – continue to be an overhang on the company’s shares.

Magnitude of Estimate Revisions

Reflecting the influence from analysts’ earnings revision, in the last 30 days, the Zacks Consensus Estimate for the second quarter dropped to 82 cents from 88 cents. Seven days ago, the earnings estimate was 83 cents.

For the full year, the earnings estimate moved up to $3.00 from $2.94, over the last 30 days. A week before, the estimate recorded was $3.01.

Earnings Surprise

With respect to earnings surprise, Transocean showed mixed trend in the last 4 quarters. The company recorded a minimum surprise of negative 96.0% in the third quarter of 2011 to the maximum of 112.5% in the first quarter of 2012. On average, the earnings surprise was a positive 17.7%.

Our Recommendation

Switzerland-based Transocean is the world’s largest offshore drilling contractor and the leading provider of drilling management services worldwide. The company’s drillships are contracted by oil biggies such as Chevron Corporation ( CVX - Analyst Report ) , Royal Dutch Shell plc ( RDS.A - Analyst Report ) and BP plc ( BP - Analyst Report ) .

We are maintaining our Neutral recommendation on the stock, as we see limited upside over the near term. Transocean currently retains a Zacks #3 Rank, (short-term Hold rating).

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/