Nabors (NBR) Down 13.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Nabors Industries (NBR). Shares have lost about 13.1% 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 catalysts.
Nabors Q3 Earnings Fall Y/Y, Sales Miss Estimates
Nabors Industries reported a third-quarter 2023 loss per share of $6.26 per share, wider than the year-ago quarter’s reported loss of $1.8. This underperformance was primarily due to much higher year-over-year total costs and expenses.
Revenues of $744.1 million missed the Zacks Consensus Estimate of $758 million. This was due to lower-than-expected operating income from the U.S. Drilling Segment. The top line improved from the year-ago quarter’s level of $699 million.
Adjusted EBITDA increased to $210 million from $190.8 million recorded a year ago. The amount is slightly lower than our model estimate of $210.6 million.
Segmental Performances
U.S. Drilling generated operating revenues of $276.4 million, down 7% from the year-ago quarter’s level of $297.2 million. The figure also missed the Zacks Consensus Estimate of $301 million. Operating profit totaled $49.6 million compared with the prior-year quarter’s level of $37.8 million. The figure is lower than our estimated profit of $70.8 million.
International Drilling’s operational revenues of $344.8 million increased from the year-ago quarter’s level of $306.4 million, attributed to the commencement of operations by several rigs. The unit’s top line also beat our estimate of $311.1 million. Operating profit totaled $9.9 million against the prior-year quarter’s reported loss of $0.9 million. The figure is higher than our estimated profit of $3.1 million.
Revenues from the Drilling Solutions segment totaled $72.8 million, up 21.3% from $62 million recorded in the prior-year quarter. The top line also beat our estimate of $70.7 million, driven by the efficient performance of drilling software & digitalization product lines. Additionally, the unit’s operating income of $25.3 million was higher than the year-ago quarter’s figure of $20.1 million. However, it was lower than our projection of $30.6 million.
Revenues from Rig Technologies totaled $61.4 million, up about 21.6% from the prior-year quarter’s level of $50.5 million. The metric beat our projection of $58.3 million, driven by an increase in margin and growth from the Energy Transition products. The segment’s operating profit totaled $5 million compared with the prior-year quarter’s level of $3.4 million. The figure was lower than our projection of $8.4 million.
Financial Position
Nabors’ total costs and expenses increased to $764.9 million from $691.1 million recorded in the year-ago quarter, reflecting higher direct costs, general and administrative expenses and interest expenses. Additionally, the amount is higher than our prediction of $712.6 million.
As of Sep 30, 2023, NBR had $406.6 million in cash and short-term investments, and long-term debt of about $2.5 billion, with a total debt-to-total capital of 82%.
Nabors generated a negative free cash flow of $5 million in the third quarter of 2023.
Guidance
Nabors’ fourth-quarter 2023 average rig count is expected to be in the range of 72-74. The daily margin is predicted in the band of $15,000-$15,200 in the U.S. Drilling segment. Adjusted EBITDA for Alaska and the Gulf of Mexico is anticipated to increase $1.5 million.
The International Drilling segment’s fourth-quarter 2023 daily drilling margin is anticipated in the band of $16,200-$16,300, with the Rig count up by one to two.
Nabors expects a fourth-quarter 2023 EBITDA of 10% for Drilling Solutions over the third-quarter level. Finally, adjusted EBITDA for the Rig technologies segment is estimated to be up 20% over the third-quarter level.
Nabors projects $95 million in capital spending for the fourth quarter, with about $35 million going toward new construction in Saudi Arabia.
The company expects adjusted free cash flow in the range of $165-$190 million for the fourth quarter. For full year 2023, free cash flow is estimated between $225 million and $250 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -136.96% due to these changes.
VGM Scores
Currently, Nabors has a great 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 B on the value side, putting it in the top 40% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Nabors has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Nabors Industries Ltd. (NBR) : Free Stock Analysis Report
