The shares of oilfield service company, Core Laboratories N.V. (CLB) soared to a 52-week high of $147.16 on Friday, May 10, 2013, buoyed by a slew of positive developments. The closing price of the company on May 10 was $147.04, representing an impressive year-to-date return of about 31%.
Core Labs has delivered a positive earnings surprise in three of the last four quarters with an average beat of 2.87%. The company has a market cap of $6.73 billion and a long-term expected earnings growth rate of 18.0%.
During the recently reported quarter, Core Labs’ top and bottom lines surpassed their respective Zacks Consensus Estimate as well as the year-ago results. The company’s constant emphasis on international crude-oil developments (mainly in deepwater), its global high-grading unconventional crude oil and natural gas opportunities and improvements in operations in North America complemented the results.
We expect Core Labs’ key international markets – including the Middle East, Asia Pacific, and East and West Africa – to improve further into 2013. Considering that approximately 50% of the company’s total revenue comes from outside the U.S., this should be highly beneficial for Core Labs. Additionally, the ‘Production Enhancement’ segment should continue to reap rewards from the drilling and service trends in North American oil and liquids rich shales.
Additionally, Core Labs’ technology-heavy portfolio of proprietary products and services gives it the opportunity to optimize production from new and existing fields. The company remains well positioned onshore U.S. given its strong presence in the emerging shale plays, where activity levels are not affected by the ongoing financial turmoil and commodity-price uncertainty.
However, Core Labs relies on its ability to develop and acquire essential products and technologies that drive its operational performance and growth. If these technologies and/or products become obsolete or cannot be brought to market in a timely and competitive manner, the company might face severe operational and financial dilemmas.
This accounts for Core Labs’ current Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
There are however certain other firms in the oilfield service industry that are expected to perform better than Core Labs and are worth considering at the current level. These include Dawson Geophysical Company (DWSN), Exterran Holdings Inc. (EXH) and Exterran Partners LP (EXLP). All these stocks sport a Zacks Rank #1(Strong Buy).
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