Offshore contract driller SeaDrill Limited SDRL is set to release first-quarter 2015 results before the opening bell on May 28.
SeaDrill reported mixed numbers in terms of earnings in the past few quarters. The company surpassed the Zacks Consensus Estimate in two of the trailing four quarters, while missed the same in the other two, with an average positive surprise of 0.57%. Let’s see how things are shaping up for this announcement.
Factors to Consider
As crude prices consistently remain weak and the offshore drilling market continues to be oversupplied, another challenging quarter can be expected for SeaDrill. Moreover, the company had suspended dividend during the fourth quarter against management’s previous assertion that the payout was safe through 2015. This not only indicates the building pressure on the company’s financials but also reflects indecisiveness on the part of management.
Other big names from the oil and gas drilling industry like Transocean Ltd. RIG and Diamond Offshore Drilling Inc. DO saw profits falling substantially from the year-ago quarter despite having surpassed the Zacks Consensus Estimate in the first quarter.
However, SeaDrill holds a robust portfolio of modern fleet with new equipment that command higher rates compared with peers. The company has a strong backlog and remains well contracted through 2015, which may provide some stability in these troubled times.
Moreover, the company has been more stable than its peers during the quarter in terms of contract cancellations. Apart from the contract cancellation with BP plc BP – which, per the company, is not expected to hamper cash flow through 2017 – there has been no major cancellations.
Earnings Whispers
Our proven model does not conclusively show that SeaDrill is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 62 cents.
Zacks Rank: SeaDrill carries a Zacks Rank #3 (Hold). We caution investors against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcements.
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