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Core Laboratories (CLB) Up 33.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Core Laboratories (CLB). Shares have added about 33.5% in that time frame, outperforming the S&P 500.

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

Core Labs' Q1 Earnings Top Estimates, Sales Miss

Core Laboratories reported first-quarter 2021 results wherein adjusted earnings of 15 cents a share came ahead of the Zacks Consensus Estimate of 13 cents. This outperformance is attributable to lower year-over-year operating expenses, which declined to $96.8 million from $261.4 million a year ago. However, the bottom line declined from the year-ago quarter’s earnings of 31 cents per share. This downside was caused by a drop in the year-over-year revenues of both reservoir description and production-enhancement segments.

Further, this oilfield service provider’s adjusted revenues of $108.38 million missed the Zacks Consensus Estimate of $110 million. Moreover, the top line fell from the year-ago quarter’s revenues of $152.4 million.

Segmental Performance

Reservoir Description: Revenues decreased 25.5% to $76.5 million from $102.7 million in first -quarter 2020, thanks to operational disturbances related to the coronavirus pandemic. Moreover, operating income fell from $11.06 million in the year-ago period to $10.05 million and also missed the Zacks Consensus Estimate of $10.9 million. The North American mid-continent winter storm triggered workplace delays and additional expenses, resulting in these unfavorable comparisons. Meanwhile, the operating margin of 13% was lower than the prior-year quarter’s 15%.

Production Enhancement: Revenues were $31.9 million compared with $49.7 million a year earlier. Moreover, segmental operating income of $1.6 million in the quarter missed the Zacks Consensus Estimate of $1.8 million due to lower completion activity resulting from the North America winter storm. Meanwhile, the year-ago period reported an operating loss of $121.3 million.

Financials and Dividend

As of Mar 31, 2021, Core Labs had cash and cash equivalents worth $27.8 million and a long-term debt (including lease obligations) of $208.2 million. The company’s debt-to-capitalization was 58.8%.

In the reported quarter, Core Labs generated $8 million in operating cash and its capital expenditure totaled $2.8 million. This, in turn, led to a $5.2-million free cash flow (FCF) generation. Markedly, this is the 78th consecutive quarter of the company’s FCF recognition.

Core Labs’ board of directors approved a regular quarterly dividend of a cent per share on the company's common stock, payable May 18, 2021 to all its shareholders of record as of May 3, 2021.

2021 View

With the gradual recovery from the coronavirus-induced economic disruption, Core Labs issues an improving outlook for the current year’s U.S. land activity and international growth opportunities. This, in turn, is expected to sequentially improve revenues in Core Labs’ production enhancement unit during the second quarter of 2021. Further, the rising activity levels are projected to yield higher incremental margins in the second half of the ongoing year.

As Core Labs’ prospects are directly associated with expanding its client activity and new market penetration, mainly globally, it continues to primarily focus on the ongoing development of new client-driven technologies and geographical exploration along with a deepened concentration on digitization and automation throughout its business.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -6.34% due to these changes.

VGM Scores

At this time, Core Laboratories has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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

Core Laboratories has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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