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Core Labs' (CLB) Q4 Earnings Meet, Sales Miss Estimates

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Core Laboratories N.V. (CLB - Free Report) recently reported fourth-quarter 2019 results, wherein adjusted earnings of 38 cents a share were in line with the Zacks Consensus Estimate of 38 cents. The company’s earnings were driven by cost-control initiatives and operational efficiencies. However, the profit was below the company’s previous guidance of 37-38 cents and declined from the year-ago quarter’s earnings of 48 cents. The downside was caused by steep decline in U.S. onshore activity during the fourth quarter. 

Meanwhile, this oilfield service provider delivered adjusted revenues of $156.8 million, beating the Zacks Consensus Estimate of $155 million. The top line also came above the company’s guidance of $154-$156 million. However, it fell from the year-ago quarter’s revenues of $173.2 million.

Segmental Performance

Reservoir Description: Revenues fell 3.7% to $102.6 million from $106.6 million in fourth-quarter 2018 thanks to slower-than-expected progression on international projects and steep decline in U.S. activity during the quarter under review. Adjusted operating income inched up 0.6% year over year to $17 million. As such, operating margin came in at 17% compared with 16% in the prior-year quarter.

Production Enhancement: Revenues were approximately $54.2 million compared with $66.7 million in fourth-quarter 2018. Segmental operating income was about $7.5 million in the quarter, down 35% from the year-ago quarter’s level of $11.6 million. Operating margin declined to 14% from the year-ago quarter’s figure of 17%. The segmental underperformance is due to a steep decline in U.S. onshore well completion activity.

Financials and Dividend

As of Dec 31, 2019, Core Labs had cash and cash equivalents of around $11.1 million and long-term debt (including lease obligations) of approximately $305 million. The company’s debt-to-capitalization ratio was 62.6%.

In the quarter, Core Labs generated $21 million in operating cash and its capital expenditure totaled $4.7 million. This further led to the $16.6 million free cash flow (FCF) generation. Markedly, this is the 73rd consecutive quarter of the company’s FCF recognition.

With an aim to preserve its strong balance sheet, the board of directors declared a quarterly cash dividend of 25 cents per share, down from previous dividend of 55 cents per share. The amount is payable in the first quarter to its shareholders of record as of Jan 24.

Core Laboratories N.V. Price, Consensus and EPS Surprise

 

Core Laboratories N.V. Price, Consensus and EPS Surprise

Core Laboratories N.V. price-consensus-eps-surprise-chart | Core Laboratories N.V. Quote

 

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Core Labs expects first-quarter 2020 revenues in the range of $159-$164 million range on the back of moderate improvement in the U.S. land activity throughout the period compared with the exit rate of 2019.Operating income is anticipated in the $25-$27 million band with operating margin being estimated at 16%. The company foresees first-quarter earnings per share in the bracket of 39-41 cents.

Core Labs expects factors associated with the global crude oil market to create a tighter market in the second half of 2020. Long-term international projects will attract sustained level of capital investment, which is required to replace decline in production from mature fields. Consequently, the company foresees international activity to grow by mid-single digit in 2020.

Zacks Rank & Key Picks

Core Labs currently carries a Zacks Rank #5 (Strong Sell). Meanwhile, few better-ranked players in the energy space are Murphy Oil Corporation (MUR - Free Report) , California Resources Corporation (CRC - Free Report) and Suncor Energy (SU - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

California Resources Corporation has trailing four-quarter positive earnings surprise of 711.1%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters. The stock holds a Zacks Rank #2 (Buy).

Suncor Energy has trailing four-quarter positive earnings surprise of 2.2%, on average. The company’s earnings beat the consensus mark in two of the last four quarters. It holds a Zacks Rank #2.

Murphy Oil Corporation has trailing four-quarter positive earnings surprise of 37.4%, on average. The company carries a Zacks Rank #3 (Hold).

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