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Earnings Preview: Noble Corp.

Zacks Equity Research

Leading contract drilling company, Noble Corporation (NE) is set to report its second-quarter 2013 results on Jul 17. Let’s see how things are shaping up prior to the announcement.

In the last quarter, the company’s earnings of 59 cents per share increased 25.5% from 47 cents per share earned in the year-ago quarter. The growth was boosted by multi-regional operational improvements. Also, the results were ahead of the Zacks Consensus Estimate of 57 cents.

Growth Factors this Past Quarter

In the first quarter, total revenue of Noble Energy rose 21.7% to almost $971.0 million from $797.7 million in the comparable quarter last year. However, the top line failed to meet the Zacks Consensus Estimate of $989.0 million. Contract Drilling Services contributed $928.7 million to the total revenue, reflecting a year-over-year increase of 24.4% mainly on improved fleet utilization and higher average dayrates.

Total operating income shot up almost 60% to $229.8 million from the year-ago level of $143.6 million. Operating income from the Contract Drilling segment rose 60.5% year over year to $225.1 million from $140.3 million.

The company has 74% of all rig days committed for this year, including 79% of floating rig days and 76% of jackup rig days. For 2014, 55% of the rig days are booked, comprising 71% of the floater time and 50% of the jackup rig days. Overall, total backlog at the end of the first quarter was approximately $14.0 billion versus $14.3 billion as of year-end 2012.

Earnings Whispers?

Our proven model does not conclusively show that Noble Energy is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.72%. This is because the Most Accurate Estimate is at 57 cents while the Zacks Consensus Estimate currently stands at 58 cents.

Zacks Rank #3 (Hold): Noble Energy’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Rank when combined with an ESP of -1.72% indicates the possibility of lower results. We caution against stocks with Zacks Rank #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

W&t Offshore Inc. (WTI), Earnings ESP of +9.09% and a Zacks Rank #1 (Strong Buy).

Newpark Resources Inc. (NR), Earnings ESP of +5.26% and a Zacks Rank #1 (Strong Buy).

PetroQuest Energy Inc. (PQ), Earnings ESP of +28.57% and a Zacks Rank #1 (Strong Buy).


Read the Full Research Report on NE

Read the Full Research Report on WTI

Read the Full Research Report on PQ

Read the Full Research Report on NR

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