Oilfield service company, Core Laboratories N.V. (CLB) reported record second-quarter 2014 adjusted earnings per share (EPS) of $1.35, in line with the Zacks Consensus Estimate but higher than the year-ago quarter figure of $1.32 per share.
Total quarterly revenue of $267.6 million – a record second-quarter result for Core Laboratories – was about 1.7% higher than the prior-year quarter level. Higher revenues from all its business segments led to the improvement. However, the top line failed to meet the Zacks Consensus Estimate of $279.0 million.
Segment Performance
Reservoir Description: Segment revenues were $130.6 million, compared with $129.2 million in second-quarter 2013. The flattish results reflect the effect of comparatively lower revenues from high-margin projects as well as international and deepwater associated sales.
Operating income (excluding foreign exchange losses) for the unit fell 5.5% year over year to $35.6 million. Operating margin for the quarter was 27%.
Production Enhancement: Segment revenues were approximately $111.0 million in the reported quarter against $110.2 million in second-quarter 2013. The segment failed to see any substantial revenue growth as improvement in the North American market was offset by declining sales from Latin America.
Operating income (excluding foreign exchange losses) fell 1.6% year over year to $37.4 million. Operating margin for the quarter was 34%.
Reservoir Management: Segment revenues of about $26.0 million were up 9.5% year over year. An increase in Core Laboratories’ project portfolio was the main catalyst for the improvement.
Operating income (excluding foreign exchange losses) increased 25.6% year over year to $9.6 million. Operating margin for the quarter was 37%.
Balance Sheet & Free Cash Flow
As of Jun 30, 2014, Core Laboratories had cash and cash equivalents of $29.6 million. Capital expenditures for the first quarter were $12.1 million. The company generated free cash flow of almost $53.5 million.
Quarterly Dividend & Share Repurchase
On Jul 8, 2014, Core Labs’ 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 Aug 18, to shareholders of record as of Jul 18.
During the reported quarter, the company bought back 455,000 shares, reducing its outstanding diluted share count to 44,707,000, a 16-year low for the company.
Guidance
For the third quarter, the company expects EPS to increase about 11% sequentially and be in the $1.49–$1.52 range. Core Laboratories expects third-quarter revenues to range from $280.0 to $290.0 million.
For fourth quarter 2014, Core Labs expects EPS in the $1.56 to $1.61 range and revenues between $285.0 million and $295.0 million.
Core Laboratories foresees higher North American activity, more deepwater coring programs and a strong demand for high-pressure, high-temperature reservoir fluid phase behavior projects, all of which should lead to the growth. In the international market, Core Laboratories anticipates modest growth in the remainder of the year, based on favorable Brent oil prices.
Zacks Rank & Other Stock Picks
Currently, Core Laboratories holds a Zacks Rank #4 (Sell). Meanwhile, one can consider better-ranked players from the same industry such as RPC Inc. (RES), Flotek Industries Inc. (FTK) and Unit Corporation (UNT), all of which sport a Zacks Rank #1 (Strong Buy).
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