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Nabors (NBR) Down 15.2% Since Earnings Report: Can It Rebound?

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More than a month has gone by since the last earnings report for Nabors Industries Ltd. (NBR - Free Report) . Shares have lost about 15.2% 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 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 drivers.

Second Quarter 2017 Results

Nabors Industries reported second-quarter 2017 adjusted loss from continuing operations of $0.38 per share, wider than the Zacks Consensus Estimate of a loss of $0.35. Further, the reported loss was also wider than the year-ago adjusted loss of $0.26 per share. Lower revenues in international markets along with higher costs in the U.S. and international operations led to weaker results. 

However, the quarterly revenues of $630.5 million surpassed the Zacks Consensus Estimate of $597 million. Further, the recorded revenue was higher than the year-ago quarter level of $517 million. Increased rig activities in the U.S. and Canadian markets along with improvement in Nabors Drilling Solutions drove revenues.

Nabors’ U.S. operations generated quarterly revenues of $187.3 million, up 33.5% from the year-ago level. This was mainly driven by the increased rig count by 87.3% to 100.6 in the reported quarter in the Lower 48. However, the US operations recorded an operating loss of $56.1 million compared with a loss of $48.3 million in the prior-year period. The wider loss is attributed to the additional costs incurred due to rig reactivation.

The Canadian market witnessed 158.7% year-over-year growth in revenues and recorded sales of $17.1 million. Moreover, the segment’s quarterly loss of $5 million was narrower than an operating loss of $10.8 million in the year-ago quarter. Rig activity increased by 195% which in turn led to the improvement.

International operations registered 5.1% year-over-year decline in revenues to $380.3 million. Operating income plunged 32.8% from second-quarter 2016 to $36.2 million. Reduction in rig activities impacted the results. The average operating rigs in the international market was 93 compared with 101 in the prior-year quarter, reflecting a decline of 8.4%.

Revenues at the Rig Services segment increased 137% from the prior-year quarter to $93 million. This segment benefited primarily from increasing demand for Nabors Drilling Solutions products and services along with better performance in Canrig, the company’s manufacturing unit. The unit incurred a loss of $1.3 million compared with a loss of $19.7 million in the year-ago quarter.

Expenses

Total costs and expenses increased 2.8% to $765.4 million, compared with $744.8 million in the year-ago quarter. Direct expenses related to operations were $417.5 million, up 22.3% from the year-ago quarter. General /administrative expenses, Research/engineering expenses and interests costs also increased.

Balance Sheet

As of Jun 30, 2017, the company had $232 million in cash and short-term investments and $3,740.2 million in long-term debt, with a debt-to-capitalization ratio of approximately 55.1%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Nabors's stock has a poor Growth score of F, however its Momentum is doing a bit better with a D.  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.

Zacks' style scores indicate that the company's stock is suitable solely for value investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting a below inline return from the stock in the next few months.




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