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Why Is Core Laboratories (CLB) Down 19.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Core Laboratories (CLB - Free Report) . Shares have lost about 19.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Core Laboratories due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Core Labs' Q2 Earnings and Sales Lag Estimates

Core Laboratories reported second-quarter 2021 results wherein adjusted earnings of 18 cents a share missed the Zacks Consensus Estimate of 19 cents. This underperformance is attributable to lower-than-expected revenues from the reservoir description segment. However, the bottom line improved from the year-ago quarter’s earnings of 14 cents per share. This upside was attributable to the year-over-year increase in revenues of the production-enhancement segment and lower year-over-year operating expenses, which declined to $105.9 million from $118.3 million a year ago.

This oilfield service provider’s adjusted revenues of $118.75 million missed the Zacks Consensus Estimate by 0.09%. However, the top line rose from the year-ago quarter’s sales of $115.74 million.

Segmental Performance

Reservoir Description:  Revenues decreased 11.5% to $78.3 million from $88.4 million in second-quarter 2020 and also lagged the Zacks Consensus Estimate of $82 million, thanks to project delays related to the coronavirus pandemic. Moreover, operating income fell from $13.53 million in the year-ago period to $7.27 million and also missed the Zacks Consensus Estimate of $11.50 million. The segment's operating income decreased as the company worked to restore temporary cost-cutting initiatives that had been implemented before. The operating margin of 9.6% was lower than the prior-year quarter’s 17%.

Production Enhancement:  Revenues were $40.5 million, comparing favorably with $27.3 million a year earlier and also surpassed the Zacks Consensus Estimate of $36.9 million. Moreover, segmental operating income of $3.83 million in the quarter outpaced the Zacks Consensus Estimate of $3.1 million owing to increased sales and market penetration of unique energetic products and diagnostic services in both U.S. and foreign markets. The year-ago period, however, reported an operating loss of $16.3 million.

Financials and Dividend

As of June 30, 2021, Core Labs had cash and cash equivalents worth $33.6 million and a long-term debt (including lease obligations) of $208.3 million. The company’s debt-to-capitalization was 57.4%.

In the reported quarter, Core Labs generated $9.5 million in operating cash and its capital expenditure totaled $2.9 million. This, in turn, led to a $6.6-million free cash flow (FCF) generation. This is the 79th consecutive quarter of the company’s FCF recognition.

Core Labs’ board of directors approved a regular quarterly dividend of a cent per share on the company's common stock, payable Aug 24, 2021 to all its shareholders of record as of Aug 9, 2021.

2021 View

As the momentum for international crude-oil markets steadily rises and U.S. activity continues to gradually progress, Core Labs remains confident about its growth possibilities for the remainder of 2021.

For the third quarter, Core Labs’ revenues are anticipated in the $122-$126 million range while operating income is estimated in the $14-$15 million band.

As Core Labs’ prospects are directly associated with expanding its client activity and new market penetration, mainly globally, it continues focus on primarily the ongoing development of new client-driven technologies and geographical exploration along with a deepened concentration on digitization and automation throughout its business.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -13.04% due to these changes.

VGM Scores

At this time, Core Laboratories has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 indicates a downward shift. It's no surprise Core Laboratories has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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