Nabors (NBR) Down 10.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Nabors Industries (NBR). Shares have lost about 10.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nabors due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Nabors Reports Q2 Loss
Nabors Industries reported second-quarter 2023 adjusted loss of $2.26 per share, which missed the Zacks Consensus Estimate of a profit of $1.50 per share. This underperformance was primarily due to higher year-over-year direct costs, general and administrative expenses, research and engineering and interest expenses.
However, the loss was significantly narrower than the year-ago quarter’s reported loss of $6.99 per share. This improvement was due to better operating income from NBR’s International Drilling and Drilling Solutions segments.
Revenues of $778.8 million marginally beat the Zacks Consensus Estimate of $778 million, owing to better performance in some of NBR’s segments. The top line also improved from the year-ago quarter’s level of $632 million.
Adjusted EBITDA increased from $158 million to $235 million year over year. The amount is less than our model estimation of $247.8 million.
Segmental Performances
U.S. Drilling generated operating revenues of $314.8 million, up 24.4% from the year-ago quarter’s level of $253 million. The figure missed our estimate of $354.5 million due to a decrease in the rig count. Operating profit totaled $75.4 million compared with the prior-year quarter’s profit of $8.3 million. The figure is lower than our projection of $78.4 million.
International Drilling’s operational revenues of $337.7 million increased from the year-ago quarter’s level of $296.3 million. This was due to strong performance in the Middle East. The unit’s top line also beat our estimate of $308.8 million. Operating profit totaled $10.4 million compared with the prior-year quarter’s profit of $4.6 million. The figure is higher than our projection of $1.9 million.
Revenues from the Drilling Solutions segment totaled $76.9 million, up 37.6% from $55.9 million recorded in the prior-year quarter. The top line also beat our estimate of $71 million, driven by the efficient performance of drilling software & digitalization product lines. Additionally, the unit’s operating income of $28.4 million beat the year-ago figure of $18.3 million. The figure is also higher than our projection of $27.3 million.
Revenues from Rig Technologies increased about 41% to $63.6 million from the prior-year quarter’s level of $45.1 million. The metric beat our projection of $58.3 million, driven by international sales of capital equipment and spare parts and energy transition. The segment’s operating profit totaled $5.1 million compared with the prior-year quarter’s profit of $2.1 million. The figure is lower than our estimation of $5.6 million.
Financial Position
Nabors’ total costs and expenses increased to $736.1 million from $692.3 million in the year-ago quarter, reflecting higher direct costs, general and administrative expenses, research and engineering and interest expenses. Additionally, the amount is higher than our prediction of $731.9 million.
As of Jun 30, 2023, NBR had $429.1 million in cash and short-term investments. As of the same date, long-term debt was about $2.5 billion, with a total debt-to-total capital of 80.9%.
Nabors generated an adjusted free cash flow of $26.8 million in the reported quarter.
Guidance
Nabors’ third-quarter 2023 average rig count is expected to be in the range of 74-76. The daily margin is predicted around $16,000 in the U.S. Drilling segment. Alaska and the Gulf of Mexico's adjusted EBITDA are anticipated to decline about $7 million in the third quarter of 2023, primarily as a result of the work necessary for recertification on the M400 offshore rig.
The International Drilling segment’s third-quarter 2023 daily drilling margin is anticipated in the band of $16,000-$16,200, with the Rig count up by one to two rigs.
Nabors expects a third-quarter 2023 EBITDA of 3% for Drilling Solutions over the second-quarter level. Finally, adjusted EBITDA for the Rig technologies segment is estimated at $3 million over the second-quarter level.
Nabors projects $125 million in capital spending for the third quarter, with about $48 million going toward new construction in Saudi Arabia.
The company expects adjusted free cash flow of approximately $80 million for the third quarter. For full-year 2023, free cash flow is estimated between $300 million and $350 million.
The capital expenditure for the first quarter of 2023 is expected at $150 million , with the full-year 2023 figure estimated at $490 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -86.49% due to these changes.
VGM Scores
At this time, Nabors has a strong Growth Score of A, 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 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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, 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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Nabors Industries Ltd. (NBR) : Free Stock Analysis Report
