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Why Is Nabors Industries (NBR) Up 4.2% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Nabors Industries Ltd. (NBR - Free Report) . Shares have added about 4.2% in that time frame.

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

Fourth Quarter 2017 Results

Nabors reported fourth-quarter 2017 adjusted loss from continuing operations of 34 cents per share, slightly wider than the Zacks Consensus Estimate of a loss of 33 cents. Weaker-than-expected results can be attributed to lower than anticipated rig counts and margins in the International segment. The reported loss was also wider than the year-ago adjusted loss of 30 cents per share.

Quarterly revenues of $709.3 million were above the Zacks Consensus Estimate of $706 million. Further, the top line was 31.5% higher than the year-ago quarter level of $539.2 million. Improvement in the top line was primarily driven by increased rig activities and margins in the U.S. segment.
Segments

Beginning this quarter, the company has segregated the reporting for ‘Rig Services’ into two segments namely ‘Drilling Solutions’ and ‘Rig Technologies.’

Nabors’ U.S. operations generated quarterly revenues of $233.2 million, up 56.5% from the year-ago level. This was mainly driven by an increase in dayrates and margins in Lower 48. Though U.S. operations incurred an operating loss of $41.1 million, it improved from the loss of $42.9 million in the prior-year period.

Canadian market witnessed 17.8% year-over-year growth in revenues to stand at $19.9 million in the quarter under review. Moreover, the segment’s quarterly loss of $5.7 million was narrower than operating loss of $8.5 million in the year-ago quarter on the back of higher average daily rig margins and increased revenues.

International operations registered 11.1% year-over-year increase in revenues to $381.4 million due to higher average daily rig margins. Further, operating income rose 25.9% from fourth-quarter 2016 to $27.9 million. However, operating income declined from the prior-quarter figure of $32.3 amid reduction in rig counts and average daily margins.

Revenues at the Drilling Solutions segment increased to $44 million in fourth-quarter 2017 compared with $17.6 million figure recorded in the year-ago quarter. As such, the unit turned around from a loss of $2.7 million in the year-ago quarter to an operating profit of $8.1 million in the quarter under review.  

Revenues at the Rig Technologies segment increased to $79.2 million against the prior-year quarter’s level of $46.1 million. However, the segmental loss widened to $7.3 million compared with the prior-year loss of $2.8 million amid high development expenses related to the Robotics Drilling Systems acquired in the prior quarter.

Expenses

Total costs and expenses decreased 9.1% to $847.1 million from $931.9 million in the year-ago quarter on the back of lower impairment charges. However, the results were partly offset by direct expenses, general/administrative expenses, research/engineering expenses and interest costs, which increased in the reported quarter.

Balance Sheet

As of Dec 31, 2017, the company had $365.4 million in cash and short-term investments, and $4,027.8 million in long-term debt, with a debt-to-capitalization ratio of approximately 57.8%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate have trended downward during the past month. There have been two revisions higher for the current quarter compared to six lower.

VGM Scores

At this time, NBR has a subpar Growth Score of D. Its Momentum is doing a bit better with a C. 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.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, NBR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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