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Oceaneering International (OII) Down 62.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Oceaneering International (OII - Free Report) . Shares have lost about 62.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Oceaneering International 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.

Oceaneering's Q4 Earnings and Sales Top Estimates

Oceaneering International, Inc. delivered better-than-expected earnings in fourth-quarter 2019. The company reported adjusted earnings per share of 3 cents, attributable to higher activity levels. While the Zacks Consensus Estimate was of a loss of 16 cents.

However, the bottom line fell 57.1% from the year-ago earnings of 7 cents. This underperformance could be attributed to disappointing results from the ‘Asset Integrity’ and the ‘Subsea Projects’ units.

The company’s revenues of $561 million surpassed the Zacks Consensus Estimate of $526 million and also improved 13.3% year over year from $495 million.

Segmental Information

Remotely Operated Vehicles (ROV): Revenues were $116.02 million compared with $96.7 million in fourth-quarter 2018. Operating loss was $18.66 million, widening from $1.27 million loss in the year-ago quarter on costs incurred by the company in anticipation of robust activity this year. Meanwhile, days on hire rose 12.8% year over year to 14,836 while vessel utilization increased to 58% compared with 52% a year ago. 

Subsea Products: Revenues came in at $183.7 million, up from the prior-year figure of $129.5 million. Meanwhile, operating loss came in at $10.32 million compared with the year-ago loss of $3.8 million. The deterioration could be attributed to seasonal decline in service and rental sales. However, the backlog surged to $630 million as of Dec 31, 2019 from the year-ago backlog of $332 million.

Subsea Projects: Revenues dipped 2.9% to $86.7 million from $89.3 million in the year-ago quarter. Moreover, the unit suffered an operating loss of $148.07 million, wider than $79.4 million loss in fourth-quarter 2018 due to lower-than-expected income from the service and rental business.

Asset Integrity: Revenues of $61.8 million were marginally lower than the year-ago figure of $62.8million. Due to persistent pricing woes, the segment incurred an operating loss of $48.9 million against the prior-year income of $1.3 million.

Advanced Technologies: Revenues from this non-energy segment totalled $112.6 million, lower than $116.7 million in fourth-quarter 2018 as Oceaneering faced delays and cost overruns on various projects.

Meanwhile, operating income fell to $5.3 million from $15.4 million in the year-ago quarter due to lower-than-expected improvement in entertainment business operating margins.

Capital Expenditure & Balance Sheet

Capital expenditure in the fourth quarter including acquisitions summed $18.8 million. As of Dec 31, Oceaneering had cash and cash equivalents of $374 million, and long-term debt of $796.5 million. The debt-to-capitalization ratio was 42.55%.

Guidance

Oceaneering projects first-quarter 2020 EBITDA in the range of $36-$42 million compared to $48.7 million in the fourth quarter due to less seasonal offshore activity.

Looking ahead in 2020, the company expects improvement from its ‘Advanced Technologies’, ‘Subsea Products’ and ‘Subsea Projects’ units owing to an estimated increase in activity and robust operating margins in every unit.

Further, Oceaneering expects to generate EBITDA between $180 million and $220 million in 2020. It anticipates its capital expenditure in the band of $75-$105 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -58.4% due to these changes.

VGM Scores

At this time, Oceaneering International has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 this revision indicates a downward shift. Notably, Oceaneering International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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