Transocean (RIG) to Report Q3 Earnings: What's in the Cards?
Transocean RIG is set to release third-quarter results on Oct 30. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a loss of 22 cents per share on revenues of $738.2 million.
Let’s delve into the factors that might have influenced the offshore driller’s performance in the aforementioned quarter. However, it’s worth taking a look at RIG’s prior-quarter results first.
Highlights of Q2 Earnings & Surprise History
In the last reported quarter, the Switzerland-based rig supplier missed the consensus mark due to lower contributions from Harsh Environment floaters. Transocean had reported an adjusted loss per share of 15 cents, 3 cents wider than the Zacks Consensus Estimate of a loss of 12 cents. However, revenues of $748 million beat the Zacks Consensus Estimate of $724 million on the back of more days of work for RIG’s vessels.
The company’s earnings missed the Zacks Consensus Estimate in three of the trailing four quarters and beat the mark in one, delivering an average negative surprise of 53.22%.
This is depicted in the graph below:
Transocean Ltd. Price and EPS Surprise
Transocean Ltd. price-eps-surprise | Transocean Ltd. Quote
Trend in Estimate Revision
The Zacks Consensus Estimate for third-quarter earnings has moved down 4.5% in the past seven days. This indicates a 266.7% decline year over year. However, the Zacks Consensus Estimate for revenues indicates a 1.1% increase from that recorded in the year-ago period.
Factors to Consider
Transocean is expected to have been hurt by a drop in utilization. As a reflection of the tepidness in the drilling landscape, our estimate for the third-quarter average utilization is pegged at 54.3%, down 5.1% year over year on the back of lukewarm activity. This might have impacted RIG’s revenues and cash flows.
Also, an increase in the company’s costs must have dented its bottom line. Going by our model, RIG’s total costs and expenses are likely to have gone up 21.6% year over year to $772.2 million in the third quarter. The upward cost trajectory could be attributed to the ongoing inflationary environment and tight labor market.
On a somewhat positive note, our model forecasts revenue efficiency of an impressive 96.5% in the to-be-reported quarter. This is an indication of minimal loss of revenues due to downtime and Transocean’s superior efficiency in translating its industry-leading backlog of $9.4 billion into cash.
What the Zacks Model Unveils
The proven Zacks model does not conclusively predict an earnings beat for Transocean this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -19.27%.
Zacks Rank: RIG currently carries a Zacks Rank #3.
Stocks to Consider
Here are some firms from the energy space that you may want to consider as these have the right combination of elements to post an earnings beat this reporting cycle.
Sitio Royalties Corp. (STR) has an Earnings ESP of +13.38% and a Zacks Rank #1 at present. The firm is scheduled to release earnings on Nov 8.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Sitiohas a trailing four-quarter average earnings surprise of 12.2%. Valued at around 3.8 billion, STR’s shares have lost 12% in a year.
California Resources Corp. CRC has an Earnings ESP of +22.05% and a Zacks Rank #1 at present. The firm is scheduled to release earnings on Nov 1.
Over the past 60 days, the Zacks Consensus Estimate for 2023 earnings has moved up 1.4%. The company is valued at $3.7 billion. In the past year, CRC’s shares have risen 22%.
Murphy USA MUSA has an Earnings ESP of +0.57% and a Zacks Rank #2 at present. The firm is scheduled to release earnings on Nov 1.
Over the past 60 days, the Zacks Consensus Estimate for 2023 earnings has moved up 2.8%. Valued at around $7.7 billion, MUSA has gained 19.5% in a year.
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Transocean Ltd. (RIG) : Free Stock Analysis Report
Sitio Royalties Corp. (STR) : Free Stock Analysis Report
Murphy USA Inc. (MUSA) : Free Stock Analysis Report
California Resources Corporation (CRC) : Free Stock Analysis Report
