Why Is Nabors (NBR) Up 7% Since Last Earnings Report?
A month has gone by since the last earnings report for Nabors Industries (NBR). Shares have added about 7% 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 the most recent earnings report in order to get a better handle on the important drivers.
Nabors Loss Wider, Sales Outperform Estimates in Q2
Nabors Industries reported a second-quarter 2022 loss from continuing operations of $6.99 per share, wider than the Zacks Consensus Estimate of a loss of $6.43. This underperformance was primarily due to much higher year-over-year total costs and expenses.
However, the loss was narrower than the year-ago loss of $18.01 per share due to better-than-expected sales from the U.S Drilling unit, Rig Technologies and the International Drilling segment.
Quarterly revenues of $631.7 million beat the Zacks Consensus Estimate of $620 million due to better-than-expected performances in some of NBR’s segments. The top line improved from the year-ago level of $489.3 million.
Nabors’ adjusted EBITDA rose from $117.3 million to $158 million year over year.
Segmental Performances
U.S. Drilling generated quarterly operating revenues of $253 million, up 56.5% from the year-ago level of $161.6 million, surpassing the Zacks Consensus Estimate of $249 million due to an increase in the rig count. The segment recorded an operating income of $8.3 million, comparing favorably to the year-ago loss of $20.8 million.
International Drilling’s operational revenues of $296.3 million increased from the year-ago quarter’s sales of $255.3 million due to the improved performance in Saudi Arabia and Latin America, which led growth and the international rig count up more than two rigs from the prior quarter. Moreover, the unit’s sales beat the Zacks Consensus Estimate of $291 million. The segmental operating profit came in at $4.6 million in the reported quarter, improving from the prior-year quarter’s loss of $8.4 million.
Revenues from the Drilling Solutions segment rose 42.9% to $55.9 million in the second quarter from about $39.1 million a year ago. However, the same marginally lagged the Zacks Consensus Estimate of $57 million. Additionally, the segment’s operating income of $18.3 million beat the year-ago figure of $6.5 million.
Revenues from Rig Technologies increased about 30.5% to $45 million from the prior-year level of $34.5 million. The metric beat the Zacks Consensus Estimate of $40.65 million due to increased activity in the reported quarter. Moreover, the segment’s operating profit came in at $2.1 million compared to the prior-year loss of $692,000.
Financial Position
Nabors’ total costs and expenses increased to $692.3 million from $654.9 million in the year-ago quarter, reflecting much higher direct expenses, general and administrative costs, and research and engineering expenses.
As of Jun 30, 2022, NBR had $417.9 million in cash and short-term investments and long-term debt of about $2.6 billion, with a total debt-to-total capital of 81.2%.
Nabors generated free cash flow of $56.9 million in the second quarter of 2022.
Guidance
Nabors’ third-quarter 2022 average lower 48 rig count is expected to increase by around three to four rigs over the second-quarter average, while the daily margin is predicted in the $10,400-$10,600 range.
This Hamilton-based entity’s International Drilling segment’s third-quarter 2022 daily drilling margin is anticipated at approximately $14,400, with the average rig count in line with the second-quarter average. Nabors expects third-quarter 2022 EBITDA for Drilling Solutions of 12% over the second-quarter level. Finally, adjusted EBITDA for NBR’s Rig Technologies segment is estimated at $2 million over the second-quarter level.
The capital expenditure for the third quarter of 2022 is to be in the range of $110-$120 million, with the full-year 2022 CAPEX still estimated at approximately $380 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted -7.62% due to these changes.
VGM Scores
At this time, Nabors has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Nabors has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Nabors is part of the Zacks Oil and Gas - Drilling industry. Over the past month, Helmerich & Payne (HP), a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended June 2022 more than a month ago.
Helmerich & Payne reported revenues of $550.23 million in the last reported quarter, representing a year-over-year change of +65.6%. EPS of $0.27 for the same period compares with -$0.57 a year ago.
Helmerich & Payne is expected to post earnings of $0.39 per share for the current quarter, representing a year-over-year change of +162.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.7%.
Helmerich & Payne has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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