A month has gone by since the last earnings report for Transocean (RIG Quick QuoteRIG - Free Report) . Shares have added about 1.7% in that time frame, underperforming the S&P 500.

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

Transocean Posts Wider-Than-Expected Q2 Loss, Revenues Miss Mark

Transocean reported an adjusted net loss of 18 cents per share for second-quarter 2021, wider than the Zacks Consensus Estimate of a loss of 15 cents. This underperformance reflects lower utilization.

However, Transocean reported break-even earnings in the year-ago period on impressive revenue efficiency and higher dayrates.

The offshore drilling powerhouse’s total revenues of $656 million fell short of the Zacks Consensus Estimate of $678 million. Also, the top line fell 29.5% from the year-earlier figure of $930 million.

Segmental Revenue Break-Up

Transocean’s Ultra-deepwater floaters contributed to 64.6% of the total contract drilling revenues while Harsh Environment floaters accounted for the remainder. In second-quarter 2021, revenues from Ultra-deepwater and Harsh Environment floaters totaled $424 million and $232 million, respectively, compared with the corresponding year-ago quarter’s reported figures of $636 million and $293 million.

Revenue efficiency was 98%, higher than 97.4% reported sequentially and the year-ago value of 97.2%.

Dayrates and Utilization

Average dayrates in the quarter rose to $369,400 from the year-ago level of $307,800. The company witnessed strong year-over-year average revenues per day from Harsh Environment floaters and Ultra-deepwater floaters. Overall, fleet utilization was 55% in the quarter, down from the prior-year period’s utilization rate of 66%.

Backlog

Transocean’s backlog record of $7.3 billion for July reflects a decline of $1.6 billion from the year-ago figure.

Costs, Capex & Balance Sheet

Operating and maintenance costs decreased to $434 million from $525 million a year ago. The company spent $41 million on capital investment in the second quarter. Cash provided by operating activities totaled $153 million. The company had cash and cash equivalents worth $988 million as of Jun 30, 2021. Long-term debt was $6.99 billion with debt-to-capitalization of 38.2% as of the same date, declining from the sequential quarter’s 38.5%.

Guidance

For the third quarter of 2021, this offshore drilling contractor expects adjusted contract drilling revenues of $670 million, indicating growth from the sequentially reported figure of $656 million. It expects third-quarter operations and maintenance expenses of $427 million. Its G&A expenses are expected to be $40 million while capital expenditure including capitalized interest is estimated to be $90 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -87.2% due to these changes.

VGM Scores

At this time, Transocean has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.