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Nabors (NBR) Down 14.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month 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 Posts Wider-Than-Expected Q4 Loss, Sales Top Estimates

Naborsrecently reported fourth-quarter 2020 loss from continuing operations (excluding special items) of $23.82 per share, wider than the Zacks Consensus Estimate of a loss of $23.56 as well as the year-ago loss of $12. This underperformance was primarily due to weak performance at the U.S. drilling and Drilling Solutions segments.

Quarterly revenues of $447 million beat the Zacks Consensus Estimate of $421 million, attributable to better-than-expected sales from the International Drilling unit ($245.1 million, compared favorably with the Zacks Consensus Estimate of $218 million) but declined from the year-ago level of $716 million.

Notably, year over year, Nabors’ adjusted EBITDA fell from $202.5 million to $108.1 million.

Segmental Performance

U.S. Drilling generated quarterly operating revenues of $134.1 million, down 53.7% from the year-ago level of $289.5 million. The segment recorded an operating loss of $26.2 million against the year-ago income of $6.8 million due to a drop in daily revenues.

Canadian Drilling’s revenues of $14.8 million in the quarter under review tumbled from the year-ago figure of $19.4 million. However, the segment’s operating loss came in at $2.5 million, narrower than the year-ago quarter’s loss of $3.2 million, attributable to an improvement in average daily gross margin as a result of higher average working rig count. 

International Drilling’s operational revenues of $245.1 million decreased from the year-ago quarter’s sales of $331.7 million. Moreover, the segmental operating loss came in at $35.5 million in the reported quarter against the prior-year income of $1.15 million due to transitory rig suspensions in Saudi Arabia, and other activity declines in the Eastern Hemisphere.

Revenues from the Drilling Solutions were 47.1% down to $32 million in the fourth quarter from $60.5 million a year ago. However, the same surpassed the Zacks Consensus Estimate of $30 million, attributable to improved activity across service lines. Moreover, the unit’s operating loss of $2.5 million came against the year-ago profit of $16.6 million.

Revenues from the Rig Technologies segment plunged 48% to $27.4 million from the prior-year level of $52.6 million. Moreover, the metric missed the Zacks Consensus Estimate of $29.5 million. Also, the segment’s operating loss narrowed to $2.03 million from the prior-year loss of $6 million owing to better capital equipment sales.

Financials

Total costs and expenses declined to $511.8 million from $973.8 million in the year-ago quarter, reflecting lower depreciation costs, and general and administrative expenses.  

As of Dec 31, 2020, the company had $481.7 million in cash and short-term investments, and a long-term debt of $2.97 billion with total debt to total capital of 72.1%.

Nabors generated free cash flow of $65.7 million in the fourth quarter.

Guidance

Nabors announced its 2021 capex guidance of $200 million, indicating a rise from the reported 2020 capex level of $190 million.

This Hamilton-based entity’s first-quarter 2021 average Lower 48 rig count is anticipated to increase by two-four rigs from the fourth-quarter 2020’s average of 54 rigs. The company projects its drilling margins to be around $8,500, implying the persistence of soft pricing.

Its Canada Drilling segment’s first-quarter 2021 rig activity is estimated to increase 30% from the fourth-quarter 2020 level. Also, the company expects March-quarter adjusted EBITDA for Drilling Solutions and Rig Technologies to remain almost in line with the December-quarter results.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.14% due to these changes.

VGM Scores

Currently, Nabors has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, 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 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.


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