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Core Labs Misses on Q1 Earnings & Revs

Zacks Equity Research

Oilfield service company, Core Laboratories N.V. (CLB) reported first quarter 2014 earnings per share (EPS) of $1.45 – excluding one-time items, namely, the effects of weather disruption, project delays and slow international operations – missing the Zacks Consensus Estimate by a penny.

Total quarterly revenue of $262.9 million also failed to meet the Zacks Consensus Estimate of $283.0 million. Following the top and bottom line miss, Core Labs shares traded 5% lower after market.

The quarter’s EPS, however, thrived on a year-over-year basis from $1.22, courtesy of improvement in all three of its business segments. In fact, the company’s track record shows this as its most profitable first quarter. Revenue was also up by around 1% from the prior-year quarter level of $260.9 million.

Segment Performance

Reservoir Description: Segment revenues at $125.3 million were almost flat year over year. The segment failed to see revenue growth due to cost overruns following delay in several deepwater projects.

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Operating income (excluding foreign exchange losses) for the unit was up 2% year over year at $35.4 million, an all-time first quarter high for the company. The result reflects growth in the number of reservoir-fluids-related projects around the world. Moreover, technological development contributed to the segment’s results.

Production Enhancement: Segment revenues increased 2.7% year over year to $110.3 million in the reported quarter. However, the number was below expectations due to delay in deepwater Gulf of Mexico projects and adverse weather effects on tight-oil operations in North America.

Operating income (excluding foreign exchange losses) improved 11.0% year over year to $38.1 million. The primary reason for the improvement was the success of Core Labs’ FLOWPROFILER service. This oil-based tracer technology has seen a surge in demand, bringing profits for the company.

Reservoir Management: Segment revenues were $27.4 million, down 3.1% year over year.

However, operating income (excluding foreign exchange losses) increased more than 7.0% year over year to an all-time quarterly high of $10.6 million. Operating margin for the quarter was 39%. The primary catalyst for the segment was high-quality study results that attracted many projects in unconventional reservoirs.

Balance Sheet & Free Cash Flow

As of Mar 31, 2014, Core Laboratories had cash and cash equivalents of $23.3 million. Capital expenditures for the first quarter were $7.7 million. The company generated free cash flow of almost $58.0 million.

Quarterly Dividend & Share Repurchase

On Apr 14, 2014, Core Labs’ board of directors declared its second quarter cash dividend of 50 cents per share ($2.00 per share annualized). The new dividend will be paid on May 23, to shareholders of record as of Apr 25.

During the reported quarter, the company bought back 254,340 shares, reducing its outstanding diluted share count to a 16-year low of 45,132,000.

Guidance

For the second quarter, the company expects EPS to increase about 14% year over year and be in the $1.48–$1.53 range.

Core Labs expects second quarter revenues to range from $280.0 to $286.0 million, about 8% higher than the prior-year quarter level. The absence of weather disruptions that affected the first quarter results should aid the ongoing quarter's top line.

For 2014, Core Labs expects a 15% year-over-year growth in EPS that is guided in the $6.00 to $6.25 range. An increase in worldwide activity is expected to lead to revenues between $1,155.0 million and $1,175.0 million, 8% higher than the 2013 level.

Zacks Rank & Other Stock Picks

Core Labs currently holds a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can better-ranked players from the industry such as Exterran Holdings, Inc. (EXH), Flotek Industries Inc. (FTK) and Unit Corporation (UNT), all of which sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CLB
Read the Full Research Report on EXH
Read the Full Research Report on UNT
Read the Full Research Report on FTK)
Read the Full Research Report on FTK


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