Oceaneering (OII) Stock Down 8% Since Missing on Q3 Earnings

Shares of Oceaneering International, Inc. OII have dropped 8% since the third-quarter 2021 earnings announcement on Oct 27.Apart from this industry player’s lower-than-expected bottom-line and top-line results, the stock failed to display significant growth due to lukewarm fourth-quarter guidance for the Aerospace and Defense Technologies and the Offshore Projects Group segments.

The company expects the operating performance of its Aerospace and Defense Technologies unit to decline sequentially while for Offshore Projects Group, it projects lower revenues and tepid operating results owing to seasonality in the fourth quarter and a decrease in contribution from the field support activities in Angola.

Behind the Earnings Headlines

Oceaneering reported third-quarter 2021 adjusted loss of 1 cent per share. However, the Zacks Consensus Estimate was a profit of 5 cents. This underperformance is due to operational difficulties in the Gulf of Mexico caused by Hurricane Ida. The bottom-line loss is narrower than the year-ago quarter’s loss of 14 cents per share. This improvement can be attributed to higher revenue contribution from the Subsea Robotics, Aerospace and Defense Technologies, Offshore Projects Group and the Integrity Management & Digital Solutions units.

Oceaneering’s total quarterly revenues of $466.81 million missed the Zacks Consensus Estimate of $480 million but increased 6.1% from the year-ago sales of $440 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 $143.7 million compared favorably with $119.6 million in third-quarter 2020. The segment reported an operating income of $19.5 million, higher than the year-ago quarter’s $2.1 million. Days on hire rose 6.4% year over year to 14,474 while ROV utilization increased to 63% from 59% a year ago.

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

Revenues were $75.4 million, down from the prior-year figure of $110.4 million. Operating income in the third quarter came in at $809,000 against the year-ago quarter’s loss of $38.2 million. The backlog rose to $334 million as of Sep 30, 2021.

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

Revenues increased 30.6% to $95.6 million from $73.2 million in the year-ago quarter. Moreover, the unit’s operating income of $7.6 million came against the $12.3 million loss reported in third-quarter 2020.

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

Revenues of $62.8 million improved from the year-ago figure of $53.9 million. The segment also reported an operating income of $5.4 million compared with the prior-year quarter’s $793,000 as a result of enhanced execution of field personnel.

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 $89.4 million, up from $82.6 million in third-quarter 2020.

Operating income of $14.3 million rose from $13.1 million in the year-ago quarter.

Oceaneering International, Inc. Price, Consensus and EPS Surprise

Oceaneering International, Inc. Price, Consensus and EPS Surprise

Oceaneering International, Inc. price-consensus-eps-surprise-chart | Oceaneering International, Inc. Quote

Capital Expenditure & Balance Sheet

Capital expenditure in the third quarter including acquisitions summed $12.5 million. As of Sep 30, 2021, Oceaneering had cash and cash equivalents worth $447.7 million, and a long-term debt of $739.98 million. The total debt to total capital was 57.4%.

Outlook

For 2021, the company projects its adjusted EBITDA guidance within $210-$220 million. It estimates its capex guidance within $45-$55 million. Oceaneering projects unallocated expenses of around $30 million per quarter.

The company anticipates income tax payments of $40-$45 million for 2021. It hopes to generate a positive free cash flow this year, surpassing the amount generated in 2020.

Zacks Rank & Stocks to Consider

Oceaneering currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are EOG Resources EOG, Diamondback Energy FANG and ConocoPhillips COP, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources reported third-quarter 2021 adjusted earnings per share of $2.16, beating the Zacks Consensus Estimate of $2.01. Strong earnings were driven by increased production volumes and a higher realization of commodity prices.

EOG announced a quarterly dividend of 75 cents per share, indicating an 82% increase from the previous level. The dividend will be paid out on Jan 28, 2022 to its shareholders of record as of Jan 14, 2022. EOG Resources also declared a special dividend of $2 per share. Moreover, its board of directors updated its share repurchase authorization to $5 billion.

Diamondback Energy reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and also the year-ago quarter’s earnings of 62 cents. FANG’s bottom line was aided by better-than-expected production.

Diamondback’s board of directors declared a dividend of 50 cents per share for the third quarter. This signifies an 11.1% hike in its quarterly payout from the previous level of 45 cents. The amount will be paid out on Nov 18, 2021 to its shareholders of record as of Nov 11. FANG also generated a free cash flow of $740 million in the third quarter.

ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. This outperformance is led by increased production volumes owing to the Concho acquisition and rising realized commodity prices.

Based in Houston, TX, this one of the world’s largest independent oil and gas producers’ capital expenditures and investments totaled $1.3 billion, and dividend payments grossed $579 million. ConocoPhillips’ net cash provided by operating activities was recorded at $4.8 billion, up from the year-ago figure of $868 million. COP generated a free cash flow of $2.8 billion in the third quarter.

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