Why Is Nabors (NBR) Down 11.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Nabors Industries (NBR). Shares have lost about 11.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Nabors' Q1 Earnings Miss Estimates, Revenues Rise Y/Y
Nabors Industries reported first-quarter 2023 adjusted loss per share of 55 cents, which missed the Zacks Consensus Estimate of a profit of $1.06 per share. This underperformance was primarily due to much higher year-over-year direct costs and general and administrative expenses.
However, the loss was significantly narrower than the year-ago quarter’s reported loss of $13.88 per share. This was due to better-than-expected operating income from the U.S. and the International Drilling units.
Revenues of $789 million beat the Zacks Consensus Estimate of $768 million, owing to better-than-expected performance in some of Nabors’ segments. The top line also improved from the year-ago quarter’s level of $568.7 million.
Adjusted EBITDA increased from $130.5 million to $240 million year over year.
Segmental Performances
U.S. Drilling generated operating revenues of $350.7 million, up 61.1% from the year-ago quarter’s level of $217.6 million. The figure beat the Zacks Consensus Estimate of $343 million due to an increase in the rig count. The segment recorded an operating profit of $85.9 million, turning around from the year-ago quarter’s loss of $5.8 million.
International Drilling’s operational revenues of $320 million increased from the year-ago quarter’s sales of $279 million. This was due to an increase in performance and higher day rates on renewal contracts in Saudi Arabia. The unit’s top line also beat the Zacks Consensus Estimate of $318 million. Operating profit came in at $1.9 million compared to the prior-year quarter’s loss of $6.3 million.
Revenues from the Drilling Solutions segment totaled $75 million, up 38.5% from $54.2 million recorded in the prior-year quarter. The top line beat the Zacks Consensus Estimate of $73 million, driven by the efficient performance drilling software, and managed pressure drilling. Additionally, the unit’s operating income of $27.1 million beat the year-ago figure of $14.7 million.
Revenues from Rig Technologies increased about 59.1% to $58.5 million from the prior-year level of $36.7 million. However, the metric lagged the Zacks Consensus Estimate of $60 million. This can be attributed to the impact of delays in deliveries of capital equipment components. The segment’s operating profit came in at $3.7 million compared to the prior-year quarter’s loss of $2.8 million.
Moreover, the segment’s operating profit came in at $6.1 million compared with the prior-year profit of $1.5 million
Financial Position
Nabors’ total costs and expenses decreased to $704.9 million from $729.7 million in the year-ago quarter, reflecting lower interest expenses, depreciation and amortization costs.
As of Mar 31, 2023, NBR had $475.7 million in cash and short-term investments. As of the same date, long-term debt was about $2.6 billion, with a total debt-to-total capital of 81.4%.
Nabors generated an adjusted free cash flow of $37.2 million in the reported quarter.
Guidance
Nabors’ second-quarter 2023 average rig count is expected to be 85 rigs. The daily margin is predicted between $16,900 and $17,000 in the U.S. Drilling segment.
The segment’s second-quarter daily drilling margin is anticipated between $15,900 and $16,100, with the rig count nearly in line with the first-quarter average. Expected EBITDA for Drilling Solutions increased 3% from the first-quarter level. Adjusted EBITDA for the Rig Technologies segment is estimated at $2-$3 million.
Nabors expects first-quarter 2023 adjusted EBITDA for Drilling Solutions of 6% above the fourth-quarter level. Finally, the adjusted EBITDA for NBR’s Rig Technologies segment is estimated to be approximately in line with the fourth quarter.
The capital expenditure for the first quarter of 2023 is expected at $150 million , with the full-year 2023 figure estimated at $490 million.
NBR expects a second-quarter 2023 capital expenditure of $140 million. It also expects an adjusted free cash flow of $400 million for full-year 2023.
NBR expects a second-quarter 2023 capital expenditure of $140 million. It also expects an adjusted free cash flow of $400 million for full-year 2023.
NBR expects a second-quarter 2023 capital expenditure of $140 million. It also expects an adjusted free cash flow of $400 million for full-year 2023.
NBR expects a second-quarter 2023 capital expenditure of $140 million. It also expects an adjusted free cash flow of $400 million for full-year 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -27.89% 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 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 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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