Core Laboratories (CLB) Q2 Earnings In Line, Revenues Up Y/Y

Core Laboratories N.V. CLB recently reported second-quarter 2018 adjusted earnings of 59 cents per share, in line with the Zacks Consensus Estimate. This compares favorably with the prior-year quarter figure of 48 cents. The results were driven by improved performance of the Product Enhancement segment.

Total revenues of $175.5 million marginally outpaced the Zacks Consensus Estimate of $175 million. Revenues were up 10.9% from the prior-year level of $158.2 million. Higher revenues from the Product Enhancement segment boosted the top line, partially offset by delayed recovery of international market activities.

Segment Performance

Reservoir Description: This segment’s revenues were $102.1 million compared with $104.3 million in second-quarter 2017. Of the total revenues of the segment, more than 80% comes from the international market. The year-over-year fall in revenues were caused by delayed recovery of international market’s activities, especially in the Middle East and Asia-Pacific regions.

Operating income of the segment was about $14.8 million in the quarter compared with $18.7 million in the prior-year quarter. Operating margin of the segment was 15%.

Production Enhancement: Segment revenues were approximately $73.4 million in the quarter compared with $53.9 million in second-quarter 2017. Increased demand for the company’s advanced technology solutions helped in generating higher revenues. Notably, U.S. land revenues at the segment surged 48% year over year.

Segment operating income was about $18.4 million in the quarter compared with $8.7 million in the prior-year quarter, reflecting a surge of 111.5%. Operating margin of the segment was 26%. Improved utilization, along with higher-technology services and products drove margins in both the segments.

Balance Sheet & Free Cash Flow

As of Jun 30, 2018, Core Laboratories had cash and cash equivalents of around $13 million and long-term debt (including lease obligations) of approximately $241.7 million. The debt-to-capitalization ratio of the company was 60.5%.

Capital expenditure in the second quarter was $7.5 million, reflecting a significant increase from $2.9 million in the year-ago quarter.

The company generated free cash flow of approximately $19.5 million in the quarter under review.

Dividend

The board of directors declared a quarterly cash dividend of 55 cents per share, payable on Aug 13, 2018 to its shareholders of record as of Jul 23, 2018.

Guidance

For third-quarter 2018, Core Laboratories expects earnings to be around 64-66 cents per share. The company expects third-quarter revenues in the range of $177-179 million while operating income is expected between $36.2 million and 37.2 million. The company expects operating margin to be more than 20% in third-quarter 2018.

Zacks Rank & key Picks

Currently, Amsterdam-based oil field service provider Core Laboratorieshas a Zacks Rank #5 (Strong Sell). Investors interested in the Energy sector can opt for some better-ranked stocks like Canadian Natural Resources Limited CNQ, ConocoPhillips COP and Cheniere Energy, Inc. LNG. While Canadian Natural Resources and ConocoPhillips sport a Zacks Rank #1 (Strong Buy), Cheniere Energy has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 35.3% year over year, while its bottom line is expected to increase more than 168%.

Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 18.4% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 226.9%.

Houston, TX-based Cheniere Energy mainly focuses on liquefied natural gas-related businesses. The company’s top line for 2018 is anticipated to improve 25.9% year over year, while its bottom line is expected to increase more than 225%.

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