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Why Is Noble Corp. (NE) Down 26.6% 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 26.6% 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 catalysts.

Noble Corp.’s Q1 Earnings Miss Estimates, Up Y/Y

Noble Corp. reported first-quarter 2020 loss of 34 cents per share, excluding one-time items, wider than the Zacks Consensus Estimate of a loss of 31 cents. However, the quarterly loss was narrower than the year-ago loss of 39 cents per share.   

Total revenues fell to $281.3 million from $282.9 million in the prior-year quarter. However, quarterly revenues beat the Zacks Consensus Estimate of $268 million.

The company’s weaker-than-expected earnings can be attributed to lower average dayrate, partially offset by an increase in total rig fleet utilization and operating days.

Operating Highlights

Total average rig utilization increased to 77% from the year-ago level of 76%. However, overall average dayrate decreased to $155,526 from $172,305 in the year-ago quarter. Overall operating days increased to 1,719 from 1,570 in the year-ago period.

The average dayrate for the company's jackups was $131,253, up from $127,150 in the prior-year quarter. Moreover, average capacity utilization rose to 94% from the year-ago level of 93%.

The average dayrate for its floaters was $196,759 compared with $236,715 in the prior-year quarter. Moreover, average capacity utilization fell to 58% from the year-ago level of 60%.

Costs & Expenses

Total contract drilling service costs decreased to $161.1 million in the quarter from $171.7 million in the year-ago period. General and administrative costs rose to $17.8 million from $16 million in first-quarter 2019. Total operating costs and expenses surged to $1,413.9 million from the year-ago figure of $306.7 million, primarily due to huge impairment charges.

Backlog

As of Mar 31, 2020, the offshore drilling contractor’s total revenue backlog was $1.5 billion. Of the total, $1 billion resulted from the floating fleet while the remaining $500 million was from the jack up fleet.

Financials

Capital expenditure in the reported quarter totaled $25 million.

At first quarter-end, the company had a cash balance of $175.9 million, up from the fourth-quarter level of $104.6 million. Its long-term debt declined to $3,692.5 million from $3,779.5 million in the fourth quarter.  The company has a debt-to-capitalization of 58.7%.

Outlook

Energy demand destruction stemming from coronavirus-induced lockdowns and the oversupplied crude market is affecting upstream companies. This, in turn, is reducing demand for the services provided by companies like Noble Corp. As such, the outlook for the offshore drilling industry seems gloomy.

An estimated 51% of its available rig days remaining in the year were contracted.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted -43.04% due to these changes.

VGM Scores

At this time, Noble Corp. has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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 upward 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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