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Results from 'Magnificent Seven' duo show cloud revenue boosted by strong AI demand

Core Laboratories (CLB) Q3 Earnings and Sales Beat Estimates

Zacks Equity Research

Core Laboratories N.V. CLB recently reported third-quarter 2019 results wherein adjusted earnings of 50 cents a share surpassed the Zacks Consensus Estimate of 48 cents resulting from increased international and offshore client activity. The profit was within the company’s previously guided range of 48-52 cents.

However, the bottom line declined from the year-ago earnings of 64 cents a share. Soft contribution from the Product Enhancement segment impacted the results.

Meanwhile, this oilfield service provider delivered adjusted revenues of $173.2 million, beating the Zacks Consensus Estimate of $172 million. The top line, which also fell within the company’s guided range of $171-$175 million, decreased from the year-ago revenues of $182.1 million.

Segmental Performance

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Reservoir Description: Revenues were up 5.5% to $109.3 million from $103.6 million in third-quarter 2018. Of the total revenues from this segment, most were generated from the international market activities, which increased more than 9% year over year. Adjusted operating income rose 26% year over year to $19.2 million. As such, operating margin came in at 18% compared with 15% a year ago.

Production Enhancement: Revenues were approximately $63.9 million compared with $78.5 million in third-quarter 2018. Segmental operating income was about $11.6 million in the quarter, down 43% from the year-ago level of $20.3 million. Operating margin declined to 18% from the year-ago figure of 26%. The segmental underperformance is due to the reduction in U.S. land activity resulting from lower U.S. onshore rig counts.

Financials and Dividend

As of Jun 30, 2019, Core Labs had cash and cash equivalents of around $13.1 million and long-term debt (including lease obligations) of approximately $297 million. The company’s debt-to-capitalization ratio was 60.4%.

In the quarter, Core Labs generated $26 million in operating cash and its capital expenditure totalled $5.3 million. This further led to the $20.7-million free cash flow (FCF) generation. Markedly, this is the 72nd consecutive quarter of the company’s FCF recognition.
The board of directors declared a quarterly cash dividend of 55 cents per share, in line with the previous payout. The amount is payable in the fourth quarter to its shareholders of record as of Oct 18.

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

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

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

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Core Labs expects fourth-quarter 2019 revenues in the $161-$163 million range. Operating income is anticipated in the $28-$29 million band with operating margin estimated at 18%. The company foresees fourth-quarter earnings per share in the bracket of 44-45 cents.

Improving crude oil market fundamentals are likely to drive international activities, boosting the prospects of Core Labs’ Reservoir Description unit in turn. While the company’s deep portfolio of proprietary products and services, and ramped-up international activities bode well, a decline in both the U.S. onshore rig count and completion activity might affect its Production Enhancement unit. This, in turn, is expected to dent overall results in the December quarter.

Zacks Rank & Key Picks

Core Labs carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include Sunoco LP SUN, Equinor ASA EQNR and TC Energy Corporation TRP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sunoco’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.

Equinor’s earnings beat the Zacks Consensus Estimate in two of the preceding four quarters.

TC Energy earnings beat the Zacks Consensus Estimate in each of the last four quarters.

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Sunoco LP (SUN) : Free Stock Analysis Report
 
Core Laboratories N.V. (CLB) : Free Stock Analysis Report
 
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Statoil ASA (EQNR) : Free Stock Analysis Report
 
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