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Nabors (NBR) Down 21.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Nabors Industries (NBR). Shares have lost about 21.5% in that time frame, 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 its most recent earnings report in order to get a better handle on the important drivers.

Nabors Posts Wider-Than-Expected Q3 Loss, Sales Top

Nabors reported third-quarter 2021 loss from continuing operations (excluding special items) of $14.16 per share, wider than the Zacks Consensus Estimate of a loss of $12.9. This underperformance was primarily due to higher year-over-year total costs and expenses.

However, the loss was narrower than the year-ago loss of $22.81, attributable to better-than-expected sales from the International Drilling unit, Drilling Solutions unit and the Rig Technologies unit.  

Quarterly revenues of $524.37 million beat the Zacks Consensus Estimate of $504 million. Moreover, the top line improved from the year-ago level of $437.61 million.

Year over year, Nabors’ adjusted EBITDA rose from $114.2 million to $125.2 million.

Segmental Performances

U.S. Drilling generated quarterly operating revenues of $173.4 million, up 33.2% from the year-ago level of $130.2 million and marginally surpassed the Zacks Consensus Estimate owing to increase in average Lower 48 rig count. The segment recorded an operating loss of $19.7 million, narrower than the year-ago loss of $39.2 million.

Canadian Drilling’s revenues of $6.03 million in the quarter under review decreased from the year-ago figure of $10.8 million. The segment’s operating income came in at $1.37 million against the year-ago quarter’s loss of $3.5 million.

International Drilling’s operational revenues of $270 million increased from the year-ago quarter’s sales of $248.4 million and outpaced the Zacks Consensus Estimate of $266 million, attributable to the reactivation of drilling rigs that had been idled in Saudi Arabia for quite some time. The segmental operating loss came in at $7.3 million in the reported quarter, narrower than the prior-year quarter’s loss of $16.9 million.

Revenues from the Drilling Solutions rose 56.7% to $45.9 million in the third quarter from $29.3 million a year ago. The same outpaced the Zacks Consensus Estimate of $43 million, attributable to increased activity across all service lines. Performance drilling software and casing running services were the primary contributors to this improvement. Moreover, the unit’s operating income of $8.6 million came against the year-ago loss of $3.6 million.

Revenues from the Rig Technologies segment climbed 47.7% to $42.1 million from the prior-year level of $28.5 million. The metric also surpassed the Zacks Consensus Estimate of $39.9 million on increased overseas deliveries of capital equipment. Moreover, the segment’s operating income came in at $1.9 million against the prior-year loss of $1.8 million.

Financials

Total costs and expenses increased to $637.3 million from $588 million in the year-ago quarter, reflecting higher general & administrative costs as well as higher direct expenses.  

As of Sep 30, 2021, the company had $771.9 million in cash and short-term investments, and a long-term debt of $3.1 billion with total debt-to-total capital of 78.7%.

Nabors generated free cash flow of $133.1 million in the third quarter.

Guidance

Nabors’ fourth-quarter 2021 average Lower 48 rig count is anticipated to be in line with the third-quarter level, which is at 68 rigs.

This Hamilton-based entity’s International Drilling segment’s fourth-quarter 2021 drilling margin is estimated to decline slightly. The company expects December-quarter adjusted EBITDA for Drilling Solutions to increase by roughly 10% from the September-quarter results.

Capital expenditures for 2021 are projected to reach $270 million with around $90 million funded by SANAD to support the rig newbuild program. This amounts to $91 million of anticipated fourth-quarter capital expenditures with $32 million projected for SANAD newbuilds.



 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Nabors has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nabors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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