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A month has gone by since the last earnings report for Core Laboratories (CLB). Shares have lost about 0.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Core Laboratories 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.
Core Labs' Q2 Earnings and Revenues Beat Estimates
Core Laboratories N.V. recently reported second-quarter 2020 results wherein adjusted earnings of 14 cents a share came ahead of the Zacks Consensus Estimate of 9 cents, attributable to better-than-expected operating income from the Reservoir Description segment. Precisely, the adjusted operating income rose 14.8% year over year to $13.5 million and also surpassed the Zacks Consensus Estimate of $9.6 million. However, the profit declined from the year-ago quarter’s earnings of 46 cents per share. This downside was caused by a steep ramp-down in U.S. onshore activity during the quarter.
This oilfield service provider delivered adjusted revenues of $115.74 million, marginally beating the Zacks Consensus Estimate of $115 million. But the top line fell from the year-ago quarter’s revenues of $169.04 million.
Reservoir Description: Revenues decreased 16.3% to $88.44 million from $105.65 million in second-quarter 2019, thanks to operational disturbances related to the coronavirus pandemic. However, adjusted operating income rose 14.8% year over year to $13.5 million as demand for Core Labs’ highly-specialized reservoir fluids services was stable despite the depressed commodity price environment. Further, operating margin of 17% was in line with the prior-year quarter.
Production Enhancement: Revenues were $27.3 million compared with $63.4 million in second-quarter 2019. Segmental operating loss was $16.3 million in the quarter against the year-ago quarter’s income of $10.4 million. This segmental underperformance is due to a sharp fall in U.S. onshore well-completion activity.
Financials and Dividend
As of Jun 30, 2020, Core Labs had cash and cash equivalents worth $20.96 million and long-term debt (including lease obligations) of $286.6 million. The company’s debt-to-capitalization was 81.25%.
In the reported quarter, Core Labs generated $27 million in operating cash and its capital expenditure totaled $3.1 million. This, in turn, led to a $23.9-million free cash flow (FCF) generation. Markedly, this is the 75th consecutive quarter of the company’s FCF recognition.
With an aim to preserve its solid balance sheet and reduce the debt burden, the company’s board of directors cleared a quarterly cash dividend of a cent per share in April, down from the previous dividend of 25 cents. This dividend cut has been effective since the second quarter.
Considering the prevalent business uncertainty emanating from the coronavirus outbreak, the company was unable to provide a quantitative guidance for the upcoming quarters but sees an improving outlook for project work and international products shipment in the second half of this year. Core Labs expects factors associated with the global crude oil market to create a tighter space in the remainder of 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 31.88% due to these changes.
At this time, Core Laboratories has a nice Growth Score of B, a grade with the same score on the momentum front. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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