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Core Labs' (CLB) Stock Up 9.4% Despite Missing on Q3 Earnings

Shares of Core Laboratories N.V.  CLB have gained 9.4% since the third-quarter 2021 earnings announcement on Oct 27. 

Despite this industry player’s earnings miss, its stock rose on the back of a strong future business trends as the momentum for the worldwide crude-oil markets progresses and oilfield activity advances.

Behind the Earnings Headlines

Core Labs reported third-quarter 2021 results wherein adjusted earnings of 18 cents a share missed the Zacks Consensus Estimate of 19 cents. This underperformance is attributable to lower-than-expected operating income from both the company’s segments due to hurricane-induced activity disruptions in the Gulf of Mexico, supply chain issues and international project delays. Rising operating expenses, which increased to $111.3 million from $94 million a year ago, also impacted results. However, the bottom line improved from the year-ago quarter’s earnings of 16 cents per share. This upside was attributable to the year-over-year increase in revenues of the production-enhancement segment.

This oilfield service provider’s adjusted revenues of $118 million missed the Zacks Consensus Estimate by 4%. However, the top line rose from the year-ago quarter’s revenues of $105.4 million.

Segmental Performance

Reservoir Description:  Revenues decreased 1.6% to $78.8 million from $80.1 million in third-quarter 2020 and also lagged the Zacks Consensus Estimate of $79 million, thanks to project delays related to the coronavirus pandemic and weather disruptions in the United States. Moreover, operating income fell from $11.02 million in the year-ago period to $4.43 million and also missed the Zacks Consensus Estimate of $7.6 million. The operating margin of 11% was lower than the prior-year quarter’s 15%.

Production Enhancement:  Revenues of $39.2 million compared favorably with $25.3 million a year earlier, attributable to manufacturing productivities and the penetration of unique energetic products and diagnostic services in both the U.S. and foreign markets. However, the same lagged the Zacks Consensus Estimate of $43.5 million due to lower foreign product deliveries, which can fluctuate from quarter to quarter, and the stoppage of rig activities due to weather occurrences in the Gulf of Mexico.

Additionally, due to lengthier supply-chain lead times and a shortage of some raw materials, growth possibilities were hindered throughout the quarter. Moreover, segmental operating income of $2.78 million in the quarter missed the Zacks Consensus Estimate of $4.6 million. The year-ago period reported an operating loss of $321,000.

Core Laboratories N.V. Price, Consensus and EPS Surprise

Core Laboratories N.V. price-consensus-eps-surprise-chart | Core Laboratories N.V. Quote

Financials and Dividend

As of Sep 30, 2021, Core Labs had cash and cash equivalents worth $19.1 million and a long-term debt (including lease obligations) of $188.5 million. The company’s debt-to-capitalization was 53.9%.

In the reported quarter, Core Labs generated $11.9 million of operating cash and its capital expenditure totaled $3.1 million. This, in turn, led to an $8.8-MILLION free cash flow (FCF) generation. This is the 80th consecutive quarter of the company’s FCF recognition.

Core Labs’ board of directors approved a regular quarterly dividend of a cent per share on the company's common stock, payable Nov 29, 2021 to all its shareholders of record as of Nov 8, 2021.

2021 View

As the momentum for international crude-oil markets steadily rises and U.S. activity continues to gradually ramp up, Core Labs remains confident about its growth possibilities for the remainder of 2021.

For the December quarter, Core Labs’ revenues are anticipated in the $121-$124 million range while operating income is estimated in the $13-$15 million band.

As Core Labs’ prospects are directly associated with expanding its client activity and tapping new geographies, mainly globally, it continues its focus on the ongoing development of new client-driven technologies and geographical exploration along with a deepened concentration on digitization and automation throughout its business.

Performance of Other Energy Players

Among other players in the oilfield services industry that already reported third-quarter earnings, the bottom-line results of Schlumberger SLB and Halliburton HAL matched the respective Zacks Consensus Estimate.

Zacks Rank & Key Pick

Core Labs currently carries a Zacks Rank #4 (Sell).

Investors interested in the oilfield services space can look at a better-ranked option like TETRA Technologies, Inc. TTI with a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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