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Why Is Noble Corp. (NE) Down 1.9% Since Last Earnings Report?

Zacks Equity Research
Netflix (NFLX) closed the most recent trading day at $357.16, moving +1.87% from the previous trading session.

It has been about a month since the last earnings report for Noble Corp. (NE). Shares have lost about 1.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Noble Corp. 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 drivers.

Noble Q4 Loss Narrower Than Expected, Revenues Beat

Noble Corporation reported fourth-quarter 2018 loss of 36 cents per share, narrower than the Zacks Consensus Estimate of a loss of 41 cents. However, the figure was wider than the year-ago quarter’s loss of 29 cents.
 
Total revenues in the quarter declined to $309.9 million from $329.6 million in the prior-year quarter. However, quarterly revenues beat the Zacks Consensus Estimate of $287 million. Contract Drilling Services fell 9% year over year and contributed $292 million to total revenues.

Lower dayrates for drillships, jackups and semi-submersibles affected quarterly results. This was partially offset by increase in total rig utilization.

In 2018, the company reported a loss of $1.84 per share, narrower than the Zacks Consensus Estimate of a loss of $1.88. The leading contract drilling company reported a loss of $1.14 cents in 2017.

In 2018, total revenues declined to $1,082.8 million from $1,236.9 million in 2017. Nonetheless, the figure beat the Zacks Consensus Estimate of $1,060.0 million.

Q4 Operating Highlights

Net loss from continuing operations was $30.8 million, wider than a net loss of $13 million in the fourth quarter of 2017. Total rig utilization increased to 75% from the year-ago quarter’s level of 58%. The overall average dayrate declined to $176,443 from $213,664 in the year-ago quarter.

The average dayrate for drillships of $294,864 was substantially lower than $378,709 in the prior-year quarter. Average capacity utilization was 72% compared with 60% in the year-ago quarter.

The average dayrate for the company's jackups was $121,949 compared with $134,413 in the prior-year quarter. Average capacity utilization rose to 94% from the year-ago quarter’s level of 76%.

The average dayrate for the company's semi-submersibles was $112,434 compared with $261,661 in the prior-year quarter. Average capacity utilization jumped to 25% from the year-ago quarter’s level of 17%.

For 2019, about 62% of the available rig days were committed, including 49% of the floating rig days and 75% of the jackup rig days.

Backlog

As of Dec 31, 2018, total backlog was approximately $2.4 billion.

Financials

At the end of the fourth quarter, the company had a cash balance of $375.2 million and long-term debt of $3,877.4 million. Debt-to-capitalization ratio was 45.4% compared with 41.8% in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Noble Corp. has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 looks promising. Notably, Noble Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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