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Why Is Noble Corp. (NE) Down 21.2% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Noble Corp. (NE). Shares have lost about 21.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Noble Q2 Loss Narrower Than Expected, Revenues Top

Noble Corporation reported second-quarter 2019 loss from continuing operations of 34 cents per share, narrower than the Zacks Consensus Estimate of a loss of 45 cents. Also, the figure was narrower than the year-ago loss of 49 cents per share.

Total revenues in the quarter increased to $292.9 million from $258.4 million in the prior-year period. Also, quarterly revenues beat the Zacks Consensus Estimate of $269 million. Contract Drilling Services, which contributed $274.8 million to its total revenues, increased 11% year over year.

The strong results were supported by year-over-year increase in total rig fleet utilization and overall operating days.

Operating Highlights

Net loss from continuing operations was $85.6 million, narrower than second-quarter 2018 loss of $121.2 million.

Total rig utilization increased to 82% from the year-ago level of 54%. However, overall average dayrate declined to $154,609 from $180,689 in the year-ago quarter. Nonetheless, overall operating days rose to 1,778 from 1,371 in the year-ago period. 

The average dayrate for the company's jackups was $124,572 compared with $130,332 in the prior-year quarter. Average capacity utilization rose to 98% from the year-ago level of 70%.

The average dayrate for its floaters was $197,911 compared with $268,588 in the prior-year quarter. Average capacity utilization jumped to 67% from the year-ago level of 39%.

Nearly 73% of the available jackup rig days and 57% of floating rig days are committed for the next 12 months.

Costs & Expenses

Total contract drilling services costs increased to $168.9 million in the quarter from the year-ago period’s $151.4 million. General and administrative costs surged to $116.3 million from $21.7 million in second-quarter 2018.

Backlog

As of Jun 30, 2019, total backlog was approximately $2.1 billion, of which around $1.3 billion and $820 million were contributed by floating rig and jackup rig fleets, respectively.

Financials

Capital expenditure in the reported quarter totaled $64 million.

At the end of the second quarter, the company had a cash balance of $153.8 million and long-term debt of $3,553.1 million, with a debt-to-capitalization ratio of 44.5%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11% due to these changes.

VGM Scores

Currently, Noble Corp. has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. 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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