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Can Transocean's (RIG) Q1 Earnings Bring Positive Surprise?

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·4 min read
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Transocean Ltd. RIG is set to release first-quarter results on May 2. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 22 cents per share on revenues of $605.1 million.

Let’s delve into the factors that might have influenced the offshore driller’s performance in the March quarter. But it’s worth taking a look at RIG’s previous-quarter performance first.

Highlights of Q4 Earnings & Surprise History

In the last-reported quarter, the Switzerland-based rig supplier missed the consensus mark due to a dip in revenue efficiency and lower-than-expected utilization. Transocean had reported an adjusted loss per share of 19 cents, 9 cents wider than the Zacks Consensus Estimate. However, revenues of $671 million generated by the firm came in just above the Zacks Consensus Estimate of $668 million on the back of higher dayrates in the Harsh Environment floaters segment.

RIG missed the Zacks Consensus Estimate in each of the last four quarters, which resulted in a negative earnings surprise of 36.9%, on average. This is depicted in the graph below:

Transocean Ltd. Price and EPS Surprise

Transocean Ltd. Price and EPS Surprise
Transocean Ltd. Price and EPS Surprise

Transocean Ltd. price-eps-surprise | Transocean Ltd. Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for the first-quarter bottom line has remained the same in the past seven days. The estimated figure indicates a 15.8% decline year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 7.3% decrease from the year-ago period.

Factors to Consider

Transocean is expected to have benefited from an uptick in utilization. As a reflection of the improvement in the drilling landscape, the Zacks Consensus Estimate for the first-quarter average utilization is pegged at 54%, up 1% from a year earlier on the back of increased activity. The year-over-year improvement in utilization has most likely buoyed Transocean’s revenues and cash flows.

On a further bullish note, the company forecasts revenue efficiency to average 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 more than $6 billion into cash.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for RIG this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Transocean has an Earnings ESP of +44.19% and a Zacks Rank #3.

Other Stocks to Consider

Transocean is not the only energy company looking up this earnings cycle. Here are some other firms from the space that you may want to consider on the basis of our model:

EOG Resources, Inc. EOG has an Earnings ESP of +0.89% and a Zacks Rank #1. The firm is scheduled to release earnings on May 5.

You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2022, EOG has a projected earnings growth rate of 88.5%. Valued at around $65.3 billion, EOG has increased around 59% in a year.

Suncor Energy SU has an Earnings ESP of +14.95% and a Zacks Rank #1. The firm is scheduled to release earnings on May 9.

The Zacks Consensus Estimate for SU’s 2022 earnings has been revised 22.3% upward over the past 60 days. For 2022, the company has a projected earnings growth rate of 104.4%. Suncor has gained around 56.1% in a year.

Murphy USA MUSA has an Earnings ESP of +18.49% and is Zacks #2 Ranked. The firm is scheduled to release earnings on May 3.

MUSA is valued at around $5.7 billion. The company topped the Zacks Consensus Estimate by an average of 24.6% in the trailing four quarters. Murphy USA has gained around 70.6% in a year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Transocean Ltd. (RIG) : Free Stock Analysis Report

EOG Resources, Inc. (EOG) : Free Stock Analysis Report

Suncor Energy Inc. (SU) : Free Stock Analysis Report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

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