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Things You Must Know Ahead of Transocean's (RIG) Q4 Earnings

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Transocean Ltd. (RIG - Free Report) is set to release fourth-quarter 2020 results after the closing bell on Monday, Feb 22. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 16 cents per share on revenues of $706.5 million.

Let’s delve into the factors that might have influenced the offshore driller’s performance in the December quarter. But it’s worth taking a look at Transocean’s previous-quarter performance first.

Highlights of Q3 Earnings & Surprise History

In the last-reported quarter, the Switzerland-based rig supplier beat the consensus mark on improving utilization. Transocean had reported adjusted net loss per share of 11 cents, narrower than the Zacks Consensus Estimate of a loss of 17 cents. However, the company’s quarterly revenues of $773 million had missed the Zacks Consensus Estimate of $783 million, primarily due to lower activity levels.

As far as earnings surprises are concerned, Transocean beat the Zacks Consensus Estimate in two of the last four quarters, met once and missed in the other, delivering an earnings surprise of 24.15%, on average. This is depicted in the graph below:

Transocean Ltd. Price and EPS Surprise

Transocean Ltd. Price and EPS Surprise

Transocean Ltd. price-eps-surprise | Transocean Ltd. Quote


Trend in Estimate Revision

The Zacks Consensus Estimate for the fourth-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates a 62.8% improvement year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 10.8% decline from the year-ago period.

Factors to Consider This Quarter

The company anticipates fourth-quarter adjusted contract drilling revenues of roughly $710 million, 15.4% below the year-ago figure of $839 million. While this is expected to have impacted Transocean’s cash flows, it also points to lower fleet activity following the end of drilling operations for five rigs — the Discovery India, Discovery Inspiration, Transocean Barents, Transocean Leader, and Transocean Arctic

But on a bullish note, the company forecasts revenue efficiency to average an impressive 95% in the to-be-reported quarter. This is an indication of minimal loss of revenues due to downtime and Transocean’s superior efficiency in translating its industry-leading backlog of $7.8 billion into cash.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Transocean is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

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, for this company is +3.16%.

Zacks Rank: Transocean has a Zacks Rank #4 (Sell).

Stocks to Consider

While an earnings beat looks uncertain for Transocean, here are some firms from the energy  space that you may want to consider on the basis of our model:

PDC Energy (PDCE - Free Report) has an Earnings ESP of +10.77% and is Zacks #1 Ranked. The firm is scheduled to release earnings on Feb 24.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Diamondback Energy (FANG - Free Report) has an Earnings ESP of +8.58% and a Zacks Rank #2. The firm is scheduled to release earnings on Feb 22.

Cheniere Energy (LNG - Free Report) has an Earnings ESP of +9% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 24.

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