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Oceaneering International (OII) Up 12.6% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Oceaneering International (OII). Shares have added about 12.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Oceaneering International due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Oceaneering Q3 Earnings Beat Estimates, Sales Lag

Oceaneering International reported a third-quarter 2022 adjusted profit of 23 cents per share, beating the Zacks Consensus Estimate of a profit of 13 cents. This outperformance was largely due to robust results in certain segments.

Moreover, the bottom line strengthened considerably compared to the year-ago quarter’s loss of 1 cent per share. This can be attributed to greater year-over-year revenues from the Subsea Robotics, Manufactured Products and Offshore Projects Group segments.

However, Oceaneering’s total quarterly revenues of $559.7 million marginally lagged the Zacks Consensus Estimate of $561 million due to a decrease in year-over-year sales in a couple of OII’s units. However, revenues increased by approximately 19.9% from the year-ago sales of $466.8 million.

Segmental Information

Subsea Robotics: The unit provides remotely operated submersible vehicles for drill support, vessel-based inspection, subsea hardware installation, pipeline surveys and maintenance services.

Revenues of $169.4 million compared favorably with $143.7 million in the third quarter of 2021. Moreover, the segment reported an operating income of $37 million, greater than the year-ago quarter’s $19.5 million. Days on hire rose 6.5% year over year to 15,408, while ROV utilization increased to 67%.

Manufactured Products: The segment focuses on the manufactured products business, theme park entertainment systems and automated guided vehicles.

Revenues were $94 million, up substantially from the prior-year figure of $75.4 million. Moreover, the segment posted an operating profit of about $4.3 million in the third quarter, up considerably compared to the year-ago quarter’s profit of $809,000. Meanwhile, the backlog rose to $365 million as of Sep 30, 2022.

Offshore Projects Group: This involves Oceaneering’s former Subsea Projects segment, excluding survey services and global data solutions, and the service and rental business, excluding ROV tooling.

Revenues increased by about 60% to $152.9 million from $95.6 million in the year-ago quarter. The uptick in revenues led the unit’s operating income of $20.3 million to compare favorably with the $7.6 million income reported in the third quarter of 2021.

Integrity Management & Digital Solutions: This segment mainly covers Oceaneering’s Asset Integrity segment along with its global data solutions business.

Revenues of $58.5 million went down from the year-ago figure of $62.8 million. Moreover, the segment reported an operating income of $3 million, comparing unfavorably with the prior-year quarter’s $5.4 million as a result of operational issues.

Aerospace and Defense Technologies: The segment is engaged in Oceaneering’s government business, which focuses on defense subsea technologies, marine services and space systems.

Revenues totaled $84.7 million, down from $89.3 million in the third quarter of 2021. As a result, the operating income of $13 million fell from $14.2 million in the year-ago quarter.

Capital Expenditure & Balance Sheet

The capital expenditure in the third quarter, including acquisitions, summed at $19.3 million. As of Sep 30, 2022, OII had cash and cash equivalents worth $427.5 million and $538.1 million respectively, along with long-term debt of about $701.2 million. The debt-to-total capital was 59.5%.

Outlook

Per Oceaneering, its fourth-quarter 2022 EBITDA will decline on relatively flat revenues compared to third-quarter results. In the fourth quarter of 2022, while the company anticipates a seasonal slowdown, it expects relatively good activity in offshore markets.

For the fourth quarter of 2022, Oceaneering predicts unallocated expenses in the mid-$30 million range.

For 2022, Oceaneering now projects its consolidated EBITDA in the $215 million-$240 million range and continued significant free cash flow generation in the revised range of $25-$75 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Oceaneering International has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Oceaneering International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Oceaneering International belongs to the Zacks Oil and Gas - Field Services industry. Another stock from the same industry, Baker Hughes (BKR), has gained 6.7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Baker Hughes reported revenues of $5.37 billion in the last reported quarter, representing a year-over-year change of +5.4%. EPS of $0.26 for the same period compares with $0.16 a year ago.

For the current quarter, Baker Hughes is expected to post earnings of $0.40 per share, indicating a change of +60% from the year-ago quarter. The Zacks Consensus Estimate has changed -1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Baker Hughes. Also, the stock has a VGM Score of C.

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