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Transocean (RIG) Down 10.7% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Transocean Ltd. (RIG - Free Report) . Shares have lost about 10.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
First Quarter 2017 Results
Transocean reported adjusted earnings from continuing operations of $0.01 per share, contrary to the Zacks Consensus Estimate for a loss of $0.08. The outperformance came on the back of the company’s outstanding revenue efficiency (at 97.8%) and lower operating and maintenance expenses.
However, the bottom line deteriorated from the prior-year figure of $0.69 per share. Lower revenues and reduced drilling activity led to weaker results.
For the quarter ended Mar 31, 2017, Transocean reported revenues of $785 million, surpassing the Zacks Consensus Estimate of $735 million. However, revenues declined 41% from the year-ago quarter level of $1,341 million.
While Transocean’s ultra deepwater floaters contributed of about 64% to total revenue, harsh environment floaters and deepwater floaters accounted for 15% and 4% respectively. The remaining revenues came from other rig activities, customer early termination fees and others.
Operational Statistics
Transocean made operating profit of $173 million during the quarter compared with $424 million in the year-ago period. The decline primarily reflects lower contract drilling revenues resulting from idle/stacked and sold rigs along with lower dayrates. However, results were partially offset by increased revenues associated with three newbuild ultra-deepwater drillships and improvement in revenues efficiency.
However, net cash provided by operating activities was $184 million as against $631 million the year-ago quarter, reflecting a decline of 71%.
Expenses Break Up
Transocean was able to reduce its operating and maintenance expenses by 48% to $343 million. General and administrative expenses decreased to $39 million in the reported quarter as against $43 million in the prior-year quarter. Lower restructuring costs led to the decline in general and administrative expenses. However depreciation costs of $232 million was 7%higher in the quarter.
Dayrates, Utilization and Contract Backlog
Compared to the first quarter of 2016, dayrates fell 14.5% (from $395,400 to $337,700), unfavorably impacted by declines in deepwater floaters, midwater floaters, harsh environment and high specification jackups. The decline was partially offset by rise in the dayrates for ultra-deepwater floaters.
Overall fleet utilization was 43% during the quarter, down from the year-ago utilization rate of 51%. The decline is attributed to the idle and stacked rigs and during shipyard and mobilization periods.
Contract backlog of the company was $10.8 billion as of Apr 2017.
Capital Expenditure & Balance Sheet
Transocean spent $122 million as capital expenditure in the first quarter of 2017, the amount came down sharply by 68% compared to the year-ago quarter. Capex were mainly related toward the newbuild drillships.
As of Mar 31, 2017, Transocean had cash and cash equivalents of $3,093 million. The long-term debt of the company was $6,937 million, leading to a debt capitalization ratio of 30.3%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to two lower. In the past month, the consensus estimate has shifted by 11.9% due to these changes.
At this time, Transocean's stock has a subpar Growth Score of 'D'. However, its Momentum is doing a lot better with an 'A'. Following the same course, 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.
Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Transocean (RIG) Down 10.7% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Transocean Ltd. (RIG - Free Report) . Shares have lost about 10.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
First Quarter 2017 Results
Transocean reported adjusted earnings from continuing operations of $0.01 per share, contrary to the Zacks Consensus Estimate for a loss of $0.08. The outperformance came on the back of the company’s outstanding revenue efficiency (at 97.8%) and lower operating and maintenance expenses.
However, the bottom line deteriorated from the prior-year figure of $0.69 per share. Lower revenues and reduced drilling activity led to weaker results.
For the quarter ended Mar 31, 2017, Transocean reported revenues of $785 million, surpassing the Zacks Consensus Estimate of $735 million. However, revenues declined 41% from the year-ago quarter level of $1,341 million.
While Transocean’s ultra deepwater floaters contributed of about 64% to total revenue, harsh environment floaters and deepwater floaters accounted for 15% and 4% respectively. The remaining revenues came from other rig activities, customer early termination fees and others.
Operational Statistics
Transocean made operating profit of $173 million during the quarter compared with $424 million in the year-ago period. The decline primarily reflects lower contract drilling revenues resulting from idle/stacked and sold rigs along with lower dayrates. However, results were partially offset by increased revenues associated with three newbuild ultra-deepwater drillships and improvement in revenues efficiency.
However, net cash provided by operating activities was $184 million as against $631 million the year-ago quarter, reflecting a decline of 71%.
Expenses Break Up
Transocean was able to reduce its operating and maintenance expenses by 48% to $343 million. General and administrative expenses decreased to $39 million in the reported quarter as against $43 million in the prior-year quarter. Lower restructuring costs led to the decline in general and administrative expenses. However depreciation costs of $232 million was 7%higher in the quarter.
Dayrates, Utilization and Contract Backlog
Compared to the first quarter of 2016, dayrates fell 14.5% (from $395,400 to $337,700), unfavorably impacted by declines in deepwater floaters, midwater floaters, harsh environment and high specification jackups. The decline was partially offset by rise in the dayrates for ultra-deepwater floaters.
Overall fleet utilization was 43% during the quarter, down from the year-ago utilization rate of 51%. The decline is attributed to the idle and stacked rigs and during shipyard and mobilization periods.
Contract backlog of the company was $10.8 billion as of Apr 2017.
Capital Expenditure & Balance Sheet
Transocean spent $122 million as capital expenditure in the first quarter of 2017, the amount came down sharply by 68% compared to the year-ago quarter. Capex were mainly related toward the newbuild drillships.
As of Mar 31, 2017, Transocean had cash and cash equivalents of $3,093 million. The long-term debt of the company was $6,937 million, leading to a debt capitalization ratio of 30.3%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to two lower. In the past month, the consensus estimate has shifted by 11.9% due to these changes.
Transocean Ltd. Price and Consensus
Transocean Ltd. Price and Consensus | Transocean Ltd. Quote
VGM Scores
At this time, Transocean's stock has a subpar Growth Score of 'D'. However, its Momentum is doing a lot better with an 'A'. Following the same course, 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.
Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.