Back to top

Image: Bigstock

Why Is Nabors (NBR) Down 14.2% Since Last Earnings Report?

Read MoreHide Full Article

A month has gone by since the last earnings report for Nabors Industries (NBR - Free Report) . Shares have lost about 14.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Nabors due for a breakout? 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 catalysts.

Nabors’ Reports Narrower-Than-Expected Q2 Loss

Nabors Industries Ltd.’ssecond-quarter 2020 loss from continuing operations (excluding special items) of $14.45 per share is narrower than the Zacks Consensus Estimate of a loss of $26.40 as well as the year-ago loss of $20.50. This outperformance can be attributed to a strong contribution from the Rig Technologies segment.

However, quarterly revenues of $535.97 million missed the Zacks Consensus Estimate $541 million and also declined from the year-ago level of $809 million, primarily due to weak performance at the U.S. drilling and Drilling Solutions segments.

Notably, year over year, Nabors’ adjusted EBITDA fell from $198.4 million to $153.8 million.

Segmental Performance

U.S. Drilling generated quarterly operating revenues of $173.8 million, down 46.3% from the year-ago level of $323.4 million. The segment recorded an operating loss of $23.4 million against the year-ago income of $20.4 million due to a drop in the rig count at Lower 48.

Canadian Drilling’s revenues of $3.56 million in the quarter under review tumbled from the year-ago figure of $11.4 million. Moreover, the segment’s operating loss came in at $5.8 million, wider than the year-ago quarter’s loss of $5.5 million due to weak activity across several markets and coronavirus-induced market distortions.

International Drilling’s operational revenues of $301.1 million decreased from the year-ago quarter’s sales of $326.9 million. However, the segmental operating income came in at $276 thousand in the reported quarter against the prior-year loss of $6.9 million.

Revenues from the Drilling Solutions were 48.7% down to $33.1 million in the second quarter from $64.6 million a year ago and the same further missed the Zacks Consensus Estimate of $36.1 million. Moreover, the unit’s operating income of $1.73 million slumped from $13.8 million due to diminished activity across service lines and an increased price competition.

Revenues from the Rig Technologies segment plunged 53.8% to $33.6 million from the prior-year level of $72.75 million. However, the metric surpassed the Zacks Consensus Estimate of $29.5 million. Moreover, the segment’s operating income marginally improved to $3.17 million from the prior-year figure of $3.16 million. This upside is owing to robust sales in international markets and solid cost-saving measures.

Financials

Total costs and expenses declined to $669.5 million from $953.3 million in the year-ago quarter, reflecting lower depreciation costs and impairment charges.

As of Jun 30, 2020, the company had $494.3 million in cash and short-term investments and a long-term debt of $3.3 billion with total debt to total capital of 69.9%.

Guidance

Nabors reiterates its previously announced 2020 capex guidance cut to $240 million, indicating a $185 million decrease from the year-earlier reported figure.

This Hamilton-based entity’s third-quarter average Lower 48 rig count is anticipated to fall by two to three rigs from the second-quarter figure of 49 rigs. Additionally, the company projects its drilling margins to shrink between $9,000 and $9,500, implying more normal costs and the continued impact of soft pricing.

However, its Canada Drilling segment estimates its third-quarter adjusted EBITDA to grow on the back of seasonal activity recovery. Also, the rig count is expected to rise by four rigs in the third quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Nabors has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Nabors Industries Ltd. (NBR) - free report >>

Published in