Liberty (LBRT) Shares Move Up Since Easy Q3 Earnings Beat

The stock of Liberty Energy Inc. LBRT has gained 3.5% since its third-quarter earnings announcement on Oct 19. The company comfortably beat top and bottom-line estimates.

What Did Liberty Energy’s Earnings Unveil?

Liberty Energy announced third-quarter 2022 earnings per share of 78 cents, which handily beat the Zacks Consensus Estimate of 63 cents and turned around from the year-earlier loss of 22 cents.

The Denver-CO-based oil and gas equipment company’s outperformance reflects the impact of strong execution, higher activity and increased service pricing, which more than offset rising costs.

Total revenues came in at $1.2 billion, ahead of the Zacks Consensus Estimate of $1 billion and 81.8% above the year-ago level of $653.7 million.

Meanwhile, third-quarter adjusted EBITDA was $276.9 million against the prior-year quarter figure of just $32 million.

As part of its shareholder return policy, LBRT repurchased $70 million of its stock at an average price of $14.89 apiece and reinstated a quarterly cash dividend of 5 cents.

Liberty Energy Inc. Price, Consensus and EPS Surprise

Liberty Energy Inc. Price, Consensus and EPS Surprise

Liberty Energy Inc. price-consensus-eps-surprise-chart | Liberty Energy Inc. Quote

 

Balance Sheet & Capital Expenditure

As of Sep 30, Liberty had approximately $24 million in cash and cash equivalents. The pressure pumper’s long-term debt of $252.7 million represented a debt-to-capitalization of 15.2%. Further, the company’s liquidity — cash balance plus revolving credit facility — amounted to $298 million.

In the reported quarter, the company spent $95 million on its capital program.

Guidance

Despite growing risk in financial markets due to the aggressive monetary tightening by central banks and the fallout from China’s zero-COVID lockdown policy, Liberty management believes that the energy market remains tight. On top of this, the OPEC+ supply cut, sanctions on Russian oil and limited availability of spare production capacity are likely to further strengthen the demand for North American energy.

This means upstream operators are drilling more wells to increase output that has remained depressed over the past two years due to the lack of investment, supply-chain issues, scarcity of labor and equipment attrition. With crude demand set to remain robust and eventually surpass pre-COVID record, most of the domestic fracking capacity is on the verge of being exhausted. In this context, Liberty management sees elevated demand for its next-generation fleet that supports the clients’ requirements for quality and reliability. Notwithstanding holiday and seasonal weather, the Zacks Rank #2 (Buy) company sees fourth-quarter results in line with the strong third quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings Snapshot for Oilfield Service Providers

With Liberty belonging to the larger oilfield service industry, let’s see how some of the bigger well-known companies have performed this earnings season.

Schlumberger SLB, the largest oilfield contractor, announced third-quarter earnings of 63 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 55 cents. SLB recorded total revenues of $7.5 billion, outpacing the Zacks Consensus Estimate by 4.7%.

Schlumberger’s strong quarterly earnings resulted from strong activities in land and offshore resources in North America and Latin America. In more good news for investors, SLB generated a free cash flow of $1.1 billion during the period. The company’s capital expenditure came in at $382 million. As of Sep 30, 2022, SLB had approximately $3.6 billion in cash and short-term investments. It had long-term debt of $12.5 billion at the end of the third quarter.

Smaller rival Halliburton HAL reported third-quarter adjusted net income per share of 60 cents, surpassing the Zacks Consensus Estimate of 56 cents and well above the year-ago quarter profit of 28 cents. HAL’s outperformance reflects stronger-than-expected profit from both its divisions that came in spite of the company’s exit from Russia.

Meanwhile, revenues of $5.4 billion were 38.8% higher than the corresponding period of 2021 and above the Zacks Consensus Estimate of $5.3 billion. North American revenues rose 63.2% year over year to $2.6 billion, while revenues from Halliburton’s international operations were up 21.2% from the year-ago period to $2.7 billion. Investors should know that HAL has outsized exposure to the North American land drilling market.

Finally, Baker Hughes BKR — which along with SLB and HAL makes up the ‘Big Three’ oil services firms — reported third-quarter adjusted earnings of 26 cents per share, beating the Zacks Consensus Estimate by a penny. BKR’s better-than-expected results were primarily driven by higher contributions from the Oilfield Services business unit.

However, revenues for the July-September period totaled $5.4 billion, underperforming the Zacks Consensus Estimate by 1.4%. This was mainly caused by lackluster sales from Baker Hughes’ Turbomachinery & Process Solutions unit, which suffered due to a dip in equipment and project volumes. In an encouraging development, BKR generated a free cash flow of $417 million in the reported quarter compared with $305 million in the year-ago period.

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