Oilfield service company, Core Laboratories N.V. (CLB) reported third-quarter 2014 adjusted diluted earnings of $1.53 per share, beating the Zacks Consensus Estimate by 2 cents. The bottom line also improved from the year-ago quarter adjusted earnings of $1.36 per share. Higher sales from the newly introduced technologies and services led to the beat.
Total quarterly revenue of $276.1 million was about 1% higher than the prior-year quarter. However, reported revenues failed to meet the Zacks Consensus Estimate of $285 million.
Though the quarter was the most profitable one for the company, shares of Core Laboratories fell over 8% in the NYSE owing to a lowered fourth-quarter guidance.
Segment Performance
Reservoir Description: Segment revenues were $131.4 million, compared with $131.5 million in third-quarter 2013. The flattish results reflect the almost same amount of international and global deepwater activity as last year.
Operating income (excluding foreign exchange losses) for the unit was almost flat year over year at $36.3 million. Operating margin for the quarter was 28%.
Production Enhancement: Segment revenues were approximately $122.2 million in the reported quarter against $119.5 million in third-quarter 2013. Increased sales of higher-margin technology and services aided the results.
Operating income (excluding foreign exchange losses) increased 25% year over year to $46.7 million. Operating margin for the quarter was 38%.
Reservoir Management: Segment revenues of about $22.6 million were up 2.1% year over year. An expansion of the company’s Joint Industry Projects supported the increase.
Operating income (excluding foreign exchange losses) increased 18% year over year to $7.6 million, resulting in the most profitable third quarter for the company. Operating margin for the quarter was about 34%.
Balance Sheet & Free Cash Flow
As of Sep 30, 2014, Core Laboratories had cash and cash equivalents of $25.3 million. Capital expenditures for the third quarter were $7.8 million. The company generated free cash flow of almost $66.6 million.
Quarterly Dividend & Share Repurchase
On Oct 6, 2014, the company’s board of directors declared its quarterly cash dividend of 50 cents per share ($2.00 per share annualized). The new dividend will be paid on Nov 25 to shareholders of record on Oct 17.
During the reported quarter, Core Laboratories bought back 563,000 shares, reducing its outstanding diluted share count to 44,155,000, a 16-year low for the company.
Guidance
For the fourth quarter, the company expects earnings per share (EPS) in the $1.53–$1.56 range, down from $1.56 to $1.61 projected earlier. Lower profitability from Russia, termination of work in Kurdistan and reduced activity in Southern Iraq are reflected in the new guidance.
Core Laboratories expects fourth-quarter revenues in the range of $275–$280 million.
The company foresees higher North American activity in emerging unconventional oil plays. Meanwhile, in unconventional tight-oil and gas plays, activity is expected to remain stable. Core Laboratories’ deepwater Gulf of Mexico coring programs should further support growth. In the international market, the company anticipates a flattish trend in the remainder of the year, based on weak Brent oil prices.
Zacks Rank
Currently, Core Laboratories holds a Zacks Rank #4 (Sell).
Promising Stock Picks
One could consider better-ranked players from the same industry such as Exterran Partners, L.P. (EXLP), C&J Energy Services, Inc. (CJES) and North American Energy Partners Inc. (NOA). While Exterran Partners sports a Zacks Rank #1 (Strong Buy), C&J Energy and North American Energy Partners hold a Zacks Rank #2 (Buy).
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