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Oceaneering International (OII) Down 13.4% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Oceaneering International (OII). Shares have lost about 13.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Oceaneering International 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.

Oceaneering Q2 Earnings and Sales Top Estimates

Oceaneering reported second-quarter 2021 adjusted earnings of 10 cents per share, which beat the Zacks Consensus Estimate of 5 cents. The year-ago bottom line was a loss of 14 cents per share. Impressive results can be attributed to better-than-expected sales from the Subsea Robotics, Aerospace and Defense Technologies, and the Offshore Projects Group units. Revenues from the segments totaled $141.1 million, $105.7 million and $108 million each, ahead of the respective Zacks Consensus Estimate of $117 million, $93 million and $75 million.

Oceaneering’s total quarterly revenues of $498.2 million surpassed the Zacks Consensus Estimate of $465 million and increased 16.4% from the year-ago sales of $427.22 million.

Segmental Information

Subsea Robotics: The unit provides remotely-operated submersible vehicles for drill support, vessel-based inspection, subsea hardware installation, pipeline surveys and maintenance services.

Revenues of $141.4 million compared favorably with $119.2 million in second-quarter 2020. The segment reported an operating income of $21.7 million, higher than the year-ago quarter’s $11.7 million. Days on hire rose 3.7% year over year to 14,005 while ROV utilization increased to 62% from 59% a year ago.

Manufactured Products: The segment focuses on manufactured products business, theme park entertainment systems and automated guided vehicles.

Revenues were $79.1 million, down from the prior-year figure of $100.6 million. Moreover, operating income of $790,000 decreased considerably from the year-ago figure of $3.86 million. This underperformance was due to lower segmental revenues, which subsided the ability to leverage the company’s cost base. The backlog dropped to $315 million as of Jun 30, 2021.

Offshore Projects Group: This involves Oceaneering’s former Subsea Projects segment, excluding survey services and global data solutions, and its service and rental business excluding ROV tooling.

Revenues increased 46.3% to $108 million from $73.8 million in the year-ago quarter. Moreover, the unit’s operating income of $8 million came against the $4.13 million loss reported in second-quarter 2020.

Integrity Management & Digital Solutions: This segment mainly covers the company’s Asset Integrity segment along with its global data solutions business.

Revenues of $64.1 million improved from the year-ago figure of $54 million. The segment also reported an operating income of $4.7 million against the prior-year loss of $1.83 million as a result of enhanced execution of field personnel.

Aerospace and Defense Technologies: The segment is engaged in Oceaneering’s government business, which focuses on defense subsea technologies, marine services and space systems.

Revenues totaled $105.7 million, up from $79.6 million in second-quarter 2020.

Operating income of $19.3 million rose from $13.4 million in the year-ago quarter on the back of project mix and favorable rate-based adjustments.

Capital Expenditure & Balance Sheet

Capital expenditure in the second quarter including acquisitions summed $12.6 million. As of Jun 30, 2021, Oceaneering had cash and cash equivalents worth $456.1 million, and a long-term debt of $773.4 million. The total debt to total capital was 57.9%.

Outlook

For 2021, the company raised its adjusted EBITDA guidance to $200-$225 million. Oceaneering estimates adjusted EBITDA of $50-$55 million for third-quarter 2021. It maintains its previous organic capex guidance of $50-$70 million (including $35-$40 million of maintenance capex and $15-$30 million of growth capital expenditure). Oceaneering projects unallocated expenses of around $30 million per quarter.

The company anticipates income tax payments of $40-$45 million for 2021. It hopes to generate a positive free cash flow this year, surpassing the amount generated in 2020.



 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 200% due to these changes.

VGM Scores

At this time, Oceaneering International has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Oceaneering International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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