Why is Nabors (NBR) down 3.5% since its last earnings report?

It has been about a month since Nabors Industries (NBR) last reported earnings. Shares have lost about 3.5% in that time, 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 the most recent earnings report in order to better understand the important catalysts.

Nabors’ loss in the first quarter was larger than expected

Nabors Industries reported adjusted loss per share of $5.16 for the first quarter of 2024, compared to the Zacks Consensus Estimate of a loss of $2.24 per share. In the same quarter last year, the company reported earnings per share of $4.11. The poor performance was primarily due to significantly higher total costs and expenses year-on-year.

Revenues of $743.9 million surpassed the Zacks Consensus Estimate of $731 million. However, profit was down from $789 million in the same quarter last year. This was due to weak contributions from NBR’s US Drilling and Rig Technologies segments.

Adjusted EBITDA fell to $221 million from $240 million reported a year earlier. This amount exceeds our model’s estimate of $192.6 million.

Segment appearances

Drilling in the USA generated operating revenues of $272 million, down 22.4% compared to $350.7 million in the same quarter last year. The figure was also missing from the Zacks Consensus Estimate of $280.8 million. Operating profit was $50.5 million compared to $85.9 million in the previous quarter. This number is lower than our profit estimate of $52 million.

International drillingThe company’s operating revenues of $349.4 million increased from $320 million in the prior-year quarter, driven by the commencement of operations by five drilling rigs. However, the unit’s revenue missed our estimate of $342.9 million. Operating profit amounted to USD 22.5 million compared to USD 2 million in the same quarter of the previous year. This figure exceeds our profit estimate of $10.3 million.

Revenue from Drilling solutions segment was $75.6 million, up 0.8% from the $75 million reported in the prior-year quarter. However, the top line missed our estimate of $86.5 million. Additionally, the unit’s operating income of $26.9 million was lower than the prior-year quarter of $27.1 million. However, it was higher than our forecast of USD 25.7 million.

Revenue from Rig Technologies was USD 50.2 million, a decrease of 14.2% compared to the previous quarter’s level of USD 58.5 million. These figures exceeded our forecast of USD 38.3 million. Segment operating profit was $4.2 million compared to $3.7 million in the previous quarter. This number is higher than our forecast of $3.7 million.

Financial position

Nabors’ total costs and expenses increased to $736.9 million from $704.9 million in the year-ago quarter, reflecting higher general and administrative expenses, interest expense and other expenses. Moreover, this amount is higher than our forecast of USD 724.7 million.

As of March 31, 2024, NBR had $425.6 million in cash and short-term investments. Long-term debt was approximately $2.5 billion and the total debt to total capital ratio was 82.8%.

In the first quarter of 2024, Nabors generated free cash flow of $8.1 million.

Conductivity

Nabors expects the average rig count in the U.S. drilling segment to be around 70 in the second quarter of 2024. It also anticipates daily margin for the same period of $15,500. Adjusted EBITDA for Alaska and Gulf of Mexico is estimated at $21 million.

In the international drilling segment, Nabors expects the average rig count to increase by two to three in the second quarter of 2024 compared to the first quarter average, with a daily adjusted gross margin of approximately $15,700.

On the financial performance side, Nabors expects Drilling Solutions and Rig Technologies to generate adjusted EBITDA in the range of $30 million to $32 million and $8 million to $10 million, respectively, in the second quarter of 2024.

Additionally, Nabors anticipates that capital expenditure in the second quarter of 2024 will be approximately $190 million, of which approximately $70 million will be allocated to new investments in Saudi Arabia. The full-year capital expenditure forecast is approximately $590 million, including award funds for recent drilling rigs.

How have estimates changed since then?

It turns out that the fresh estimates have not changed over the last month.

VGM results

At this point, Nabors has a solid Growth Score of B, although it lags slightly behind its Momentum Score of C. However, the stock is rated A for value, ranking in the top 20% for this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

Nabors carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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