A month has gone by since the last earnings report for Nabors Industries (NBR). Shares have added about 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 Nabors 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 catalysts.
Nabors’ Q4 Loss Wider Than Expected
Nabors Industries fourth-quarter 2018 adjusted loss from continuing operations of 55 cents per share, much wider than the Zacks Consensus Estimate of 16 cents due to weak performance of the international drilling segment. The reported figure was also wider than the year-ago adjusted loss of 40 cents per share.
Quarterly revenues of $776.6 million missed the Zacks Consensus Estimate of $810 million. However, the top line was higher than the year-ago level of $709.3 million, which can be attributed to higher total average rigs working. During the fourth quarter, the company ran an average of 223.6 rigs all over the world compared with 210.8 in the year-ago period.
Nabors’ U.S. Drilling segment generated quarterly operating revenues of $303 million, up from the year-ago level of $233.2 million. The segment recorded operating income of $8.9 million, reflecting significant improvement from a loss of $41.1 million in the prior-year period. This was mainly driven by an improvement in drilling performance in the Lower 48 and Gulf of Mexico.
Canadian Drilling segment revenues came in at $29 million in the quarter under review, recording an uptick from the year-ago figure of $19.9 million. Moreover, the segment’s income of $929,000 witnessed a turnaround from the year-ago loss of $5.7 million.
International Drilling segment’s operations attributed to revenues of $345.1 million, which decreased from the year-ago quarter’s $381.4 million. Further, the segment incurred an operating loss of $481,000 in the quarter under review vis-a vis operating income of $27.9 million in the prior-year period. Expiration of many contracts, disruptions in Venezuelan activities as well as reduced dayrates impacted its results.
Revenues at the Drilling Solutions segment increased to $66.8 million in fourth-quarter 2018 from $44 million recorded in the year-ago period. However, the unit’s operating income of $8.1 million in the year-ago quarter improved to $11.8 million in the quarter under review. This can be attributed to higher activities across most of the segments’ product lines and greater contribution from certain services of Tesco.
Revenues at the Rig Technologies segment decreased to $61.4 million from the prior-year level of $79.3 million. However, the segment’s loss narrowed to $5.2 million from the prior-year quarter’s $7.3 million. The segment’s results were impacted by the synergies from the Tesco acquisition.
Total costs and expenses increased to $920.2 million from $847.1 million in the year-ago quarter on the back of increased direct and depreciation costs, as well as higher impairment charges.
The company used $122 million for capital expenditure in the quarter under review. Full-year capex amounted to $453 million.
Balance Sheet & Credit Facility
As of Dec 31, 2018, the company had $388.6 million in cash and short-term investments, and $3,737.3 million in long-term debt, with a debt-to-capitalization ratio of approximately 55.7%.
Notably, following the end of the quarter, along with amendment of its existing revolving credit facility, the company secured a new $1.3-billion revolving credit facility for five years.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -39.42% due to these changes.
Currently, Nabors has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nabors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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