Core Laboratories (CLB) Down 4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Core Laboratories (CLB). Shares have lost about 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 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 its most recent earnings report in order to get a better handle on the important drivers.
Core Laboratories Q2 Earnings Top, Revenues Miss
Core Laboratories reported second-quarter 2023 adjusted earnings of 21 cents per share, which marginally beat the Zacks Consensus Estimate of 20 cents. The bottom line also improved from the year-ago quarter’s reported figure of 12 cents.
Adjusted revenues of $127.9 million missed the Zacks Consensus Estimate of $132 million by 3.2% due to underperformance from Production Enhancement. The top line, however, rose from the year-ago quarter’s recorded figure of $120.9 million. This can be attributed to the Reservoir Description segment’s impressive performance.
Core Laboratories reported first-quarter 2023 adjusted earnings of 19 cents per share, which beat the Zacks Consensus Estimate of 17 cents. The bottom line also improved from the year-ago quarter’s reported figure of 8 cents. This can be attributed to higher-than-expected revenues from Reservoir Description.
Core Labs’ adjusted revenues of $128.4 million beat the Zacks Consensus Estimate of $126 million by 1.9%. The top line also rose from the year-ago quarter’s recorded figure of $115.3 million. This can be attributed to the Reservoir Description segment’s impressive performance.
Segmental Performance
Reservoir Description: Revenues in this segment increased about 10% to $83.4 million from $75.8 million in the second quarter of 2022. The top line beat our projection of $81.1 million. Operating income increased from $5.9 million in the year-ago period to $13.3 million but missed our estimate of $7.6 million. This was due to the heavy impact of the Russia-Ukraine conflict.
Production Enhancement: This segment’s revenues decreased 1.3% to $44.5 million from $45.1 million in the prior-year quarter. The same lagged our estimate of $51 million. Operating income of $5.5 million missed our projection of $7.2 million due to lower international bulk product sales and a decrease in U.S. land completion activity. The figure improved from the year-ago quarter’s reported profit of $4.9 million.
Financials and Dividends
As of Jun 30, 2023, Core Laboratories had cash and cash equivalents of $26.2 million and long-term debt of $182.6 million.
The company’s debt-to-capitalization was 45.4%. Operating cash totaled $5.6 million while capital expenditure amounted to $2.2 million.
This led to a positive free cash flow of $6.6 million. CLB’s board of directors approved a regular quarterly dividend of a cent per share on the company's common stock, payable on Aug 30, 2023, to all shareholders of record as of Jul 26, 2023.
2023 Outlook
For the third quarter of 2023, revenues are anticipated in the range of $128-$132 million. Operating income is estimated in the $15.2-$17.5 million band. Earnings per share are expected between 21 cents and 25 cents. The company expects a 20% tax rate for the same time frame.
Core Laboratories is optimistic about international upstream activity for the second half of 2023.
It anticipates increased investment for hydrocarbon production maintenance and growth, and plans to expand spending on long-cycle upstream projects in onshore and offshore environments.
CLB predicts Reservoir Description's third-quarter revenue growth to be low-single digits. Although it anticipates international growth, a slight decrease in U.S. activity may moderate the same.
Third-quarter revenues for the Production Enhancement segment is projected to be flat to down by low-single digits. The anticipated decline in U.S. revenues may be partially offset by growth in Production Enhancement international sales.
Core Laboratories thinks that the operations of the Reservoir Description segment in Russia, Ukraine and Europe may be impacted by changes in crude oil trading patterns due to the ongoing wars in Russia and Ukraine.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted 5.26% due to these changes.
VGM Scores
At this time, Core Laboratories has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. 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 C. 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, Core Laboratories has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Core Laboratories is part of the Zacks Oil and Gas - Field Services industry. Over the past month, Halliburton (HAL), a stock from the same industry, has gained 0.8%. The company reported its results for the quarter ended June 2023 more than a month ago.
Halliburton reported revenues of $5.8 billion in the last reported quarter, representing a year-over-year change of +14.3%. EPS of $0.77 for the same period compares with $0.49 a year ago.
For the current quarter, Halliburton is expected to post earnings of $0.77 per share, indicating a change of +28.3% from the year-ago quarter. The Zacks Consensus Estimate has changed 0% over the last 30 days.
Halliburton has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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