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Here's Why Investors Should Consider Selling Nabors Stock Now
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Key Takeaways
Nabors is posting persistent losses and repeated earnings misses, weakening investor confidence.
Free cash flow remains fragile, relying on one-off asset sales like the recent Quail Tools sale.
High capex, U.S. margin pressure and Mexico payment risks continue to strain near-term outlook.
Nabors Industries Ltd. (NBR - Free Report) is a leading global land-drilling contractor providing oil, gas and geothermal drilling services across nearly 20 countries. The U.S.-based multinational supplies land and offshore drilling rigs to the energy industry and fully owns Nabors Arabia, which markets rigs in Saudi Arabia. Beyond drilling, Nabors offers wellsite support services such as engineering, construction, transportation, maintenance and well logging. Its business is organized into four segments: U.S. Drilling, International Drilling, Drilling Solutions and Rig Technologies.
Lately, the company has been struggling with a series of loss-making quarters and is now facing mounting challenges that have begun to erode both market confidence and investor sentiment. The company’s latest financial performance and strategic positioning raise difficult questions about its ability to regain momentum in a highly competitive landscape. Investors who have followed its trajectory closely may find themselves asking: Is this a chance to hold on for a potential turnaround or a clear signal that the risks now outweigh the rewards? Let us dig deeper to determine whether selling the stock is the most prudent move.
Where Does Price Performance Stand for NBR?
In the past year, NBR’s shares have declined 2.1%, underperforming the broader oil and energy sector's rise of 3.3%. However, it remained ahead of the Oil & Gas Drilling sub-industry’s loss of 13.2%. Peer comparison further highlights the weakness, as Precision Drilling Corporation (PDS - Free Report) , Valaris Limited (VAL - Free Report) and Transocean Ltd. (RIG - Free Report) gained 15%, 16.1% and 4.9%, respectively, during the same period.
NBR, PDS, VAL & RIG’s One-Year Stock Performance
Image Source: Zacks Investment Research
Let Us Crack the Reasons for NBR’s Underperformance
Persistent Losses and Earnings Miss Undermine Near-Term Confidence: Nabors reported an adjusted loss of $3.67 in the third quarter of 2025, missing the Zacks Consensus Estimate by a wide margin, while revenues also came in below estimates. NBR’s earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average negative surprise of 132.44%. Peer comparison further highlights weakness as Precision Drilling, Valaris and Transocean have reported better results in the previous quarters and mostly with a positive earnings surprise history.
Despite management emphasizing operational improvements, the company continues to post net losses, reflecting structural challenges in translating activity into profitability. This weak earnings profile limits valuation upside and may keep investor sentiment under pressure, especially in an environment where capital discipline and consistent earnings delivery are increasingly demanded by the market.
Image Source: Zacks Investment Research
Free Cash Flow Remains Fragile Despite Asset Sale Windfall: Although Nabors highlighted balance sheet progress following the $625 million Quail Tools sale, adjusted free cash flow for the full year is expected to be only breakeven. This underscores that core operations are not yet generating strong, self-sustaining cash flows. Much of the deleveraging success hinges on one-off asset monetization rather than recurring cash generation, raising concerns about the company’s ability to fund capex, reduce debt further and reward shareholders without additional divestments.
High Capital Expenditure Limits Financial Flexibility: Management indicated that capital spending is unlikely to decline in 2026, with SANAD newbuild commitments continuing to absorb large amounts of cash. Elevated capex constrains near-term free cash flow and reduces flexibility if market conditions deteriorate. Investors may worry that returns on these long-dated investments will take years to materialize, while the company remains exposed to cyclical downturns, execution risks and potential cost overruns associated with large international drilling programs.
Lower 48 Margin Pressure and Activity Churn Persist: In the U.S. Lower 48, Nabors continues to face margin erosion driven by rig churn, labor inefficiencies, and rising repair and maintenance costs. While daily revenues improved modestly, these gains were largely offset by higher expenses, resulting in lower daily margins. Management acknowledged ongoing churn and pricing pressure as contracts reset at lower leading-edge rates, suggesting that U.S. land drilling profitability could remain under strain for several more quarters.
Mexico Exposure Highlights Collection and Activity Risks: Nabors’ Mexico operations remain a clear risk factor. Management expects up to two offshore rigs to be suspended and collections from PEMEX continue to fall short of expectations, with no clear structure yet to resolve outstanding 2024 receivables. Delayed payments negatively affect cash flow visibility and raise counterparty risk concerns. Continued uncertainty around customer budgets and payment timelines makes this market a drag on both earnings stability and investor confidence.
Final Verdict on NBR Stock
Overall, the investment case for Nabors appears increasingly weak at this stage. The company continues to struggle with persistent losses, repeated earnings misses and fragile free cash flow that relies heavily on one-off asset sales rather than core operational strength. Elevated capital expenditure commitments, especially tied to long-dated international projects, are limiting financial flexibility and delaying any meaningful improvement in shareholder returns. Margin pressure in the U.S. Lower 48, combined with activity churn and rising costs, suggests near-term profitability will remain under strain.
Added to this are ongoing risks from Mexico operations, including payment delays and potential rig suspensions, which cloud cash flow visibility. With the stock underperforming peers like Precision Drilling, Valaris and Transocean and lacking clear catalysts for a turnaround, the risk-reward balance appears unfavorable, making a sell or exit strategy the more prudent choice for investors for this Zacks Rank #4 (Sell) company at present.
Image: Shutterstock
Here's Why Investors Should Consider Selling Nabors Stock Now
Key Takeaways
Nabors Industries Ltd. (NBR - Free Report) is a leading global land-drilling contractor providing oil, gas and geothermal drilling services across nearly 20 countries. The U.S.-based multinational supplies land and offshore drilling rigs to the energy industry and fully owns Nabors Arabia, which markets rigs in Saudi Arabia. Beyond drilling, Nabors offers wellsite support services such as engineering, construction, transportation, maintenance and well logging. Its business is organized into four segments: U.S. Drilling, International Drilling, Drilling Solutions and Rig Technologies.
Lately, the company has been struggling with a series of loss-making quarters and is now facing mounting challenges that have begun to erode both market confidence and investor sentiment. The company’s latest financial performance and strategic positioning raise difficult questions about its ability to regain momentum in a highly competitive landscape. Investors who have followed its trajectory closely may find themselves asking: Is this a chance to hold on for a potential turnaround or a clear signal that the risks now outweigh the rewards? Let us dig deeper to determine whether selling the stock is the most prudent move.
Where Does Price Performance Stand for NBR?
In the past year, NBR’s shares have declined 2.1%, underperforming the broader oil and energy sector's rise of 3.3%. However, it remained ahead of the Oil & Gas Drilling sub-industry’s loss of 13.2%. Peer comparison further highlights the weakness, as Precision Drilling Corporation (PDS - Free Report) , Valaris Limited (VAL - Free Report) and Transocean Ltd. (RIG - Free Report) gained 15%, 16.1% and 4.9%, respectively, during the same period.
NBR, PDS, VAL & RIG’s One-Year Stock Performance
Image Source: Zacks Investment Research
Let Us Crack the Reasons for NBR’s Underperformance
Persistent Losses and Earnings Miss Undermine Near-Term Confidence: Nabors reported an adjusted loss of $3.67 in the third quarter of 2025, missing the Zacks Consensus Estimate by a wide margin, while revenues also came in below estimates. NBR’s earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average negative surprise of 132.44%. Peer comparison further highlights weakness as Precision Drilling, Valaris and Transocean have reported better results in the previous quarters and mostly with a positive earnings surprise history.
Despite management emphasizing operational improvements, the company continues to post net losses, reflecting structural challenges in translating activity into profitability. This weak earnings profile limits valuation upside and may keep investor sentiment under pressure, especially in an environment where capital discipline and consistent earnings delivery are increasingly demanded by the market.
Image Source: Zacks Investment Research
Free Cash Flow Remains Fragile Despite Asset Sale Windfall: Although Nabors highlighted balance sheet progress following the $625 million Quail Tools sale, adjusted free cash flow for the full year is expected to be only breakeven. This underscores that core operations are not yet generating strong, self-sustaining cash flows. Much of the deleveraging success hinges on one-off asset monetization rather than recurring cash generation, raising concerns about the company’s ability to fund capex, reduce debt further and reward shareholders without additional divestments.
High Capital Expenditure Limits Financial Flexibility: Management indicated that capital spending is unlikely to decline in 2026, with SANAD newbuild commitments continuing to absorb large amounts of cash. Elevated capex constrains near-term free cash flow and reduces flexibility if market conditions deteriorate. Investors may worry that returns on these long-dated investments will take years to materialize, while the company remains exposed to cyclical downturns, execution risks and potential cost overruns associated with large international drilling programs.
Lower 48 Margin Pressure and Activity Churn Persist: In the U.S. Lower 48, Nabors continues to face margin erosion driven by rig churn, labor inefficiencies, and rising repair and maintenance costs. While daily revenues improved modestly, these gains were largely offset by higher expenses, resulting in lower daily margins. Management acknowledged ongoing churn and pricing pressure as contracts reset at lower leading-edge rates, suggesting that U.S. land drilling profitability could remain under strain for several more quarters.
Mexico Exposure Highlights Collection and Activity Risks: Nabors’ Mexico operations remain a clear risk factor. Management expects up to two offshore rigs to be suspended and collections from PEMEX continue to fall short of expectations, with no clear structure yet to resolve outstanding 2024 receivables. Delayed payments negatively affect cash flow visibility and raise counterparty risk concerns. Continued uncertainty around customer budgets and payment timelines makes this market a drag on both earnings stability and investor confidence.
Final Verdict on NBR Stock
Overall, the investment case for Nabors appears increasingly weak at this stage. The company continues to struggle with persistent losses, repeated earnings misses and fragile free cash flow that relies heavily on one-off asset sales rather than core operational strength. Elevated capital expenditure commitments, especially tied to long-dated international projects, are limiting financial flexibility and delaying any meaningful improvement in shareholder returns. Margin pressure in the U.S. Lower 48, combined with activity churn and rising costs, suggests near-term profitability will remain under strain.
Added to this are ongoing risks from Mexico operations, including payment delays and potential rig suspensions, which cloud cash flow visibility. With the stock underperforming peers like Precision Drilling, Valaris and Transocean and lacking clear catalysts for a turnaround, the risk-reward balance appears unfavorable, making a sell or exit strategy the more prudent choice for investors for this Zacks Rank #4 (Sell) company at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.