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Why Is Ensco (ESV) Up 13.7% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Ensco plc (ESV - Free Report) . Shares have added about 13.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ESV due for a pullback? 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.

First-Quarter 2018 Results

Ensco plc recently reported first-quarter 2018 loss of 32 cents a share (excluding one-time items), which was wider than the Zacks Consensus Estimate of a loss of 25 cents. Moreover, the figure compared unfavorably with loss of 4 cents posted in the year-earlier quarter.

Total revenues were $417 million, down from $471 million reported in the year-ago quarter. The revenue figure also missed the Zacks Consensus Estimate of $433 million.

The weak first quarter results stemmed from fall in utilization, lower average day rates and increased operating expenses, partially offset by revenues from the Atwood rigs.

Segmental Performance

Floaters: Revenues in the segment totaled $259 million, down 9.1% from the year-ago quarter’s $285 million. This was caused by a decline in reported utilization from 47% in the prior-year period to 44% in the first quarter. Average day rates fell to $263,000 in the quarter from $337,000 in the year-ago period.

The negatives were partially offset by revenues of $21 million from the acquired Atwood rigs. Floater contract drilling expenses flared up nearly 26.7% to $185 million from $146 million witnessed in first-quarter 2017.

Operating loss in the segment was $1.4 million against the prior-year quarter’s operating income of $65.6 million. The downfall was primarily caused by 26% year-over-year increase in contract drilling expenses.

Jackups: Revenues at this segment declined 16.9% to $143 million from $172 million in the year-ago quarter. A fall in reported utilization, from 64% in the year-ago quarter to 61% in the January-March period, and a decline in the average day rate to $74,000 from $86,000, resulted in the decline. This was, however, partially offset by $5 million in revenues from the acquired Atwood rigs. Contract drilling expenses went up 6.7% year over year to $127 million in the first quarter, primarily due to the insertion of five legacy Atwood jackups.

Operating loss in the segment was $20 million against the prior-year quarter’s operating income of $21.1 million, due to 7% year-over-year rise in jackup rig’s contract drilling expenses.

Other: In the first quarter of 2018, revenues of $15 million were reported by the company, in line with the year-ago quarter. Contract drilling expenses of $13 million in the segment remained flat year over year. These traits led to operating income of $1.4 million, similar to the year-ago period.

Costs and Expenses

Depreciation expenses came in at $115.2 million compared with $109.2 million in first-quarter 2017. The uptick primarily resulted from the addition of Atwood rigs to the company’s fleet. General and administrative expenses increased to $27.9 million from $26 million in the year-ago quarter. Total operating expenses rose 13.3% year over year to $468.3 million.
 
Balance Sheet

At the end of the first quarter, Ensco had $465.4 million in cash and cash equivalents. Long-term debt was $4,987.3 million, with debt-to-capitalization ratio of 36.7% compared with 35.2% in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. Last month, the consensus estimate has shifted downward by 47.2% due to these changes.

Ensco plc Price and Consensus

 

VGM Scores

At this time, ESV has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Following the exact same course, the stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stocks has an aggregate VGM Score of D. 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 broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ESV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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