Yahoo Finance Why Is Transocean (RIG) Down 2.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Transocean (RIG). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Transocean due for a breakout? 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 catalysts.
Transocean Posts Narrower Loss, Revenue Beat in Q3
Transocean reported reported an adjusted net loss of 6 cents per share in the third quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of 15 cents. This outperformance reflects an increase in revenues due to growth in activity.
Moreover, RIG’s bottom line improved from the year-ago period’s loss of 19 cents.
The offshore drilling powerhouse’s total adjusted revenues of $730 million beat the Zacks Consensus Estimate of $679 million.
Adjusted revenues rose 16.6% from the year-earlier figure of $626 million. The outperformance was primarily due to a combination of more-than-anticipated operational days and early termination payment on Equinox and higher reimbursement.
Segmental Revenue Breakup
Transocean’s Ultra-deepwater floaters contributed to 62.7% of the total contract drilling revenues. Meanwhile, Harsh Environment floaters accounted for the remaining 37.3%.
In the third quarter of 2022, revenues from the Ultra-deepwater and Harsh Environment floaters totaled $433 million and $258 million, respectively, compared with the corresponding year-ago quarter’s reported figures of $428 million and $198 million.
Revenue efficiency for the reported quarter was 95%, lower than the 97.8% reported sequentially and the year-ago value of 98.1%.
Dayrates, Utilization & Backlog
Average day rates in the quarter declined to $343,400 from the year-ago level of $367,100. RIG witnessed a year-over-year decrease in average revenues per day from Harsh Environment floaters from $401,600 to $374,000 and the same from Ultra-deepwater floaters from $351,900 in the year-ago quarter to $326,600.
Overall, fleet utilization was 59.4% in the quarter, up from the prior-year period’s utilization rate of 52.8%.
Transocean’s backlog record of $7.3 billion for the quarter reflects a sequential increase from $6.2 billion in the last quarter.
Costs, Capex & Balance Sheet
Operating and maintenance costs decreased marginally to $411 million from $398 million a year ago. The company spent $87 million on capital investments in the third quarter. Cash provided by operating activities stood at $270 million at the end of the third quarter.
The company had cash and cash equivalents worth $954 million as of Sep 30, 2022. The long-term debt was $6.45 billion, with a debt-to-capitalization of 36.5% as of the same date.
Guidance
For the fourth quarter of 2022, RIG expects adjusted contract drilling revenues of approximately $600 million based on an average fleet revenue efficiency of 96.5%.
The firm anticipates its fourth-quarter operations and maintenance expenses to be approximately $440 million, higher than the prior quarter due to the timing of certain maintenance activities. Its general and administrative expenses for the fourth quarter are expected at around $54 million.
The net interest expense for the fourth quarter is forecast to be roughly $104 million. Capital expenditures and capital additions for the fourth quarter, including capitalized interests, are forecast to be approximately $575 million, including roughly $540 million for RIG’s newbuild drillships and $35 million of maintenance CapEx.
Finally, cash taxes for the fourth quarter are expected at roughly around $9 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -35.81% due to these changes.
VGM Scores
At this time, Transocean has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 these revisions indicates a downward shift. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Transocean Ltd. (RIG) : Free Stock Analysis Report
