Nabors Industries Flying High On Massive Earnings Beat

Michael Teague |

The Bermuda-based energy company Nabors Industries Ltd. (NBR) was trading nearly 14 percent higher midway through Wednesday’s session, and on nearly three times average volume, an indication that investors were, to no small extent, impressed with the contents of its earnings statement for the recently-ended fourth quarter, released the previous afternoon.

Though Nabors is listed as an energy drilling and exploration outfit, but company might be more accurately described as an international services contractor for the upstream oil and gas industry, both on and offshore.

Impressive Earnings Beat

For Q4 of 2013, Nabors earned $0.42 per share on revenue of $1.61 billion, topping analyst leaping beyond estimates that had set expectations for EPS of $0.20 on revenue of $1.55 billion.

The top and bottom line beats were impressive on paper, but the company readily admitted that about $0.16 of its EPS for the period was the result of tax benefits and early termination payments, rather than operations. Indeed, earnings from continuing operations excluding these items were $0.26 per share, still ahead of the $0.20 estimate, but nearly 50 percent less that the prior-year period’s $0.45 per share, though revenue had ticked up slightly on the same basis, by about one third of a percent.

Segmental Performance

A look at the company’s performance by segment is largely in keeping with this picture. Drilling and rig services were up just shy of 1 percent from the prior-year period to $1.09 million. In the US, quarterly revenue of $471 million was a 4.9 percent discount on Q4 2012, while domestic operating income was down by nearly 9 percent to $75.4 million. In Canada, things were significantly worse, with revenues down 23.4 percent to $88.6 million, while net income from operations were down over 46 percent from last year to $14.5 million.

The rig services segment also saw a 14 percent decline to $132.5 million on a year-over-year basis, with an operating loss of $2.2 million, a stark contrast to the Q4 2012’s $8.7 million profit.

As for the company’s completion and production services segment, revenues were down 1.3 percent to $292 million, and operating income was cut by nearly 54 percent to 53.6 percent.

International Operations Save the Day

The fact that Nabor’s shares were soaring on Wednesday can be explained by positive results from the company’s international operations, where revenue was up 25.5 percent on the prior-year period. Even more impressive was the company’s operating income from abroad, which had increased a shocking 197.6 percent from Q4 2012.

This was enough to prompt the research firm CSLA to upgrade the company’s stock from underperform to outperform, and this in turn was enough to send shares to a 52-week high of $21.27 before paring back slightly to $20.93 ahead of the closing bell.

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