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Nabors (NBR) Up 3.4% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Nabors Industries (NBR - Free Report) . Shares have added about 3.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nabors 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 catalysts.

Nabors Posts Wider-Than-Expected Q1 Loss, Sales Beat

Nabors Industries reported a first-quarter 2022 loss from continuing operations of $13.88 per share, wider than the Zacks Consensus Estimate of a loss of $8.95. This underperformance was primarily due to much higher year-over-year total costs and expenses.

However, the loss was narrower than the year-ago loss of $20.16 per share due to better-than-expected sales from the U.S Drilling unit, Drilling Solutions unit, and the International Drilling segment.

Quarterly revenues of $568.7 million beat the Zacks Consensus Estimate of $561 million on account of better than expected performances in some of NBR’s segments. The top line improved from the year-ago level of $461.77 million.

Nabors’ adjusted EBITDA rose from $107.7 million to $130.5 million year over year.

Segmental Performances

U.S. Drilling generated quarterly operating revenues of $217.6 million, up 52.9% from the year-ago level of $142.3 million, comfortably surpassing the Zacks Consensus Estimate of $208 million due to an increase in rig count. The segment recorded an operating loss of $5.8 million, narrower than the year-ago loss of $23.3 million.

International Drilling’s operational revenues of $279 million increased from the year-ago quarter’s sales of $246.8 million on account of an increase in average rig count of 2 to 3 rigs over the first quarter average.   Moreover, the unit’s sales beat the Zacks Consensus Estimate of $276 million. The segmental operating loss came in at $6.3 million in the reported quarter, narrower than the prior-year quarter’s loss of $18.6 million.

Revenues from the Drilling Solutions segment rose 43.3% to $54.2 million in the first quarter from about $35.7 million a year ago. The same outpaced the Zacks Consensus Estimate of $53 million driven by efficient performance drilling software, managed pressure drilling, and wellbore placement. Additionally, the unit’s operating income of $14.7 million beat the year-ago figure of $4.7 million.

Revenues from Rig Technologies increased about 42.7% to $36.7 million from the prior-year level of $25.7 million. The metric lagged the Zacks Consensus Estimate of $43.88 million and this can be attributed to the impact of delays in Canrig shipments and issues related to Russia. Moreover, the segment’s operating loss came in at $2.8 million against the prior-year loss of $2.6 million.

Financial Position

Nabors’ total costs and expenses increased to $729.7 million from $580.4 million in the year-ago quarter, reflecting much higher direct expenses and other net costs.

As of Mar 31, 2022, the company had $394 million in cash and short-term investments and long-term debt of about $2.6 billion with total debt-to-total capital of 79.3%.

Nabors generated a negative free cash flow of $40.7 million in the first quarter of 2022.

Guidance

Nabors’ second-quarter 2022 average Lower 48 rig count is expected to increase by around 6-7 rigs over the first-quarter average, while the daily margin is predicted between about $8,500.

This Hamilton-based entity’s International Drilling segment’s second-quarter 2022 daily drilling margin is anticipated to be between $12,700-$13,000 with an increase in average rig count of 2 to 3 rigs over the first quarter average. The company expects the second-quarter 2022 EBITDA for Drilling Solutions to be 5% over the first quarter’s level. Finally, adjusted EBITDA for NBR’s Rig Technologies segment is estimated to be around $2 million.

Capital expenditure for the second quarter of 2022 is to be in the range of $110-$120 million, with full-year 2022 CAPEX estimated to be approximately $380 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Nabors has a nice Growth Score of B, though it is lagging a lot 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 B. 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 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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