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Why Is Rowan (RDC) Down 11.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Rowan (RDC - Free Report) . Shares have lost about 11.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Rowan due for a breakout? 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.

Rowan Companies Q3 Loss Narrower-Than-Expected, Revenues Beat

Rowan Companies plc reported adjusted third-quarter 2018 loss from continuing operations of $1.13 per share, narrower than the Zacks Consensus Estimate loss of $1.15. However, the quarterly loss was wider than the year-ago quarter's loss of 16 cents.

Total revenues were $193 million in the third quarter, down from $292 million in the prior-year quarter. On the flip side, the top line beat the Zacks Consensus Estimate of $179 million.

The decline in total revenue-producing rig days, fall in average dayrates and lower average utilization were responsible for the decline.  
 
Dayrates and Utilization

The company's deepwater rigs recorded an average dayrate of $135,000, down from $476,600 in the year-ago quarter. Moreover, jackup rigs saw a dayrate of $115,900, down from $122,100 in the prior-year quarter.

The overall dayrate of all the rigs was $117,300 compared with $157,700 in third-quarter 2017. Also, average utilization of the company's rigs was 66% compared with 74% in the comparable quarter last year.

Total revenue-producing rig days declined 23.8% year over year to 1,395 in the third quarter.

Total Expenses

In the third quarter, the company reported $309.4 million in total costs, higher than $299.8 million in the year-ago quarter. The primary reason behind the increase in costs was 8.1% higher direct operating expenses (from $168.7 million to $182.3 million).

Financials

As of Sep 30, 2018, the company's cash balance was $1.0 billion and long-term debt was $2.3 billion. The long-term debt-to-capitalization ratio of the company was 31.2%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Rowan has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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




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