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Oceaneering International (OII) Up 38.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Oceaneering International (OII - Free Report) . Shares have added about 38.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Oceaneering International due for a pullback? 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 drivers.

Oceaneering Swings to Q1 Earnings

Oceaneering International, Inc. delivered better-than-expected earnings for first-quarter 2020. The company reported adjusted earnings per share of 4 cents while the Zacks Consensus Estimate was of a loss of 19 cents. Moreover, the bottom line reversed the prior-year adjusted loss of 24 cents per share, attributable to benefits derived from cost-control measures.

However, the company’s revenues of $536.67 million missed the Zacks Consensus Estimate of $541 million. This underperformance could be attributed to disappointing results from the Advanced Technologies and the Subsea Projects units. However, the top line improved 8.7% year over year from $494 million.

Segmental Information

Remotely Operated Vehicles (ROV): Revenues were $111.78 million compared with $100.34 million in first-quarter 2019. Operating income was $9.06 million, higher than $1.42 million in the year-ago quarter attributable to cost management and efficiencies along with less installations and mobilizations. Meanwhile, days on hire rose 14.7% year over year to 14,853 while vessel utilization increased to 65% from 53% a year ago.

Subsea Products: Revenues came in at $194.8 million, up from the prior-year figure of $128.8 million. Meanwhile, operating loss came in at $91.85 million compared with the year-ago loss of $476,000. However, the backlog surged to $528 million as of Mar 31, 2020 from the year-ago backlog of $464 million.

Subsea Projects: Revenues dropped 31.5% to $61.5 million from $89.7 million in the year-ago quarter. Moreover, the unit suffered an operating loss of $145.3 million against $2.89 million income in first-quarter 2019 due to weak revenues resulting from soft seasonal vessel and survey activity.

Asset Integrity: Revenues of $59.1 million were marginally lower than the year-ago figure of $60.7 million. Due to persistent pricing woes, the segment incurred an operating loss of $109.4 million, wider than the prior-year loss of $713,000.

Advanced Technologies: Revenues from this non-energy segment totalled $109.4 million, down from $114.3 million in first-quarter 2019.

Meanwhile, operating loss of $10.6 million came in against $9.59 million income in the year-ago quarter due to the unfavourable impact on entertainment business operating margins on account of the coronavirus pandemic.

Capital Expenditure & Balance Sheet

Capital expenditure in the first quarter including acquisitions summed $27.2 million. As of Mar 31, Oceaneering had cash and cash equivalents worth $307.5 million, and long-term debt of $806.4 million. The total debt to total capital was 55.9%.

Guidance

Oceaneering projects unallocated expenses in the high $20-million range per quarter.

The company has further slashed its capital expenditure estimate to the $45-$65 million band. Further, Oceaneering reduced cash tax payments view to the range of $30-$35 million. The company is targeting expense savings of $125-$160 million annualized by the end of this year and hopes to be free cash flow positive for 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Oceaneering International has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

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


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