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Core Laboratories (CLB) Q4 Earnings: Disappointment in Store?

Zacks Equity Research

Core Laboratories CLB is expected to report fourth-quarter 2018 earnings on Jan 31, after market close.  

In the last reported quarter, the company’s earnings of 64 cents per share beat the Zacks Consensus Estimate by a penny. However, the firm managed to beat estimates only once in the trailing four quarters.

Let’s see which way are top and bottom-line estimates headed this time.

The Zacks Consensus Estimate for fourth-quarter earnings stands at 49 cents, having declined by two cents over the past seven days. This reflects a decline of about 15% from the year-ago quarter. The Zacks Consensus Estimate for revenues is pegged at $175 million compared with $172 million in the prior-year quarter.

Core Laboratories N.V. Price and EPS Surprise

Core Laboratories N.V. Price and EPS Surprise | Core Laboratories N.V. Quote

Let’s take a look at the factors that are likely to shape Core Laboratories’ fourth-quarter earnings.

Factors at Play

During fourth-quarter 2018, the West Texas Intermediate (WTI) crude plunged from a multi-year high of $76.40 a barrel in early October to below $45 in late December, per the U.S. Energy Information Administration. The overall decline in the commodity price will likely be unfavorable for Core Laboratories, as oilfield service businesses are positively correlated with crude price.

Per its guidance provided during the third-quarter earnings release, Core Laboratories expects fourth-quarter revenues in the $173-$176 million range. While the expectation is almost in line with the year-ago level, it represents a sequential fall. Moreover, the demand and pricing for North American oilfield services is expected to to have been weak in the October-to-December quarter due to pipeline constraints in the prolific Permian Basin and declining well productivity.

Further, the company is bearing the brunt of muted activities in international and offshore markets. To make things worse, Core Laboratories does not anticipate a recovery in the international markets anytime soon.

Considering all these factors, we expect Core Laboratories to post lackluster results in the to-be-reported quarter.

Earnings Whispers

Our proven model also shows that Core Laboratories is unlikely to beat estimates this earnings season. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.   

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Core Laboratories currently carries a Zacks Rank #5 (Strong Sell). We caution investors against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Though an earnings beat looks uncertain for Core Laboratories, here are a few energy firms from the same industry that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the upcoming quarterly release:

CSI Compressco LP CCLP has an Earnings ESP of +4.17% and a Zacks Rank #3. The company is expected to release third-quarter earnings on Feb 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

TechnipFMC FTI has an Earnings ESP of +3.79% and holds a Zacks Rank #3. The company is slated to release third-quarter earnings on Feb 20.

Unit Corporation UNT has an Earnings ESP of +13.93% and a Zacks Rank #3. The company is anticipated to report quarterly numbers on Feb 29.

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