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Diamond Offshore Drilling (DO) Up 1.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Diamond Offshore Drilling (DO). Shares have added about 1.3% in that time frame, outperforming the S&P 500.

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

Diamond Offshore Misses on Q2 Earnings, Boosts 2019 Capex Budget

Diamond Offshore incurred second-quarter 2019 adjusted loss of 99 cents per share, wider than the Zacks Consensus Estimate of a loss of 89 cents and the year-ago loss of 33 cents as well.

Moreover, total revenues amounted to $217 million, down from $269 million in the year-ago quarter. The figure also missed the Zacks Consensus Estimate of $227 million.

These weaker results were primarily caused by reduced average day-rates and lower rig utilization.

Operational Performance

Rigs recorded an average day-rate of $273,000, lower than $317,000 in the prior year. Moreover, rig utilization slipped to 51% from 53% a year earlier.

In the second quarter, revenues in the Contract Drilling segment dropped 21.8% year over year to approximately $207.3 million.

Notably, as of Jul 1, 2019, the company had a total contracted backlog of $2 billion that reflects more than 20 rig years of work.

Financials

As of Jun 30, 2019, Diamond Offshore had approximately $147.5 million in cash and cash equivalents while long-term debt totaled almost $2 billion. The debt-to-capitalization ratio was 24.8%.

Guidance

For the third quarter, the firm anticipates its contract drilling expenses between $205 million and $215 million.

Moreover, the capital budget guidance for the full year is raised $20 million and estimated to be in the range of $360-$380 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -18.68% due to these changes.

VGM Scores

At this time, Diamond Offshore Drilling has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Diamond Offshore Drilling has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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