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Ensco's 2Q17 Results Are around the Corner—What to Expect

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Part 4
Ensco's 2Q17 Results Are around the Corner—What to Expect PART 4 OF 5

How Analysts View Ensco’s 2Q17 Earnings

EBITDA estimates

Along with a fall in revenues, analysts expect a fall in Ensco’s (ESV) EBITDA1 for 2Q17. Analysts estimate that Ensco’s EBITDA would be $157 million in 2Q17, down from $167 million in 1Q17.

How Analysts View Ensco&#8217;s 2Q17 Earnings

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Costs

As we saw in the earlier articles, Ensco has secured three new contracts. To commence these newly secured contracts, Ensco would have to shed some upfront costs. For example, the drillship DS-4 was stacked, and the company expects to incur around $28 million toward reactivation of this rig and $15 million toward the rig’s upgrades. 

The company now expects its 2Q17 contract drilling expense to be $282 million, which is higher than its previous guidance of $270 million–$280 million.

As Ensco’s revenues are expected to rise from the third quarter so would its EBITDA. For 3Q17, Ensco’s estimated EBITDA stands at $162 million. In 2017, analysts expect the company’s EBITDA to be ~$643 million, which is much lower than its EBITDA of ~$1.2 billion in 2016. However, declining EBITDA readings have been common among offshore drillers (IYE) during the current downturn.

Based on its EBITDA and revenues, Ensco’s EBITDA margin was 35.4% in 1Q17. The following are the EBITDA margins for Ensco’s peers based on their 1Q17 EBITDA and revenues:

  • Rowan Companies’ (RDC) EBITDA margin is 48.2%.
  • Transocean’s (RIG) EBITDA margin is 47.9%.
  • Seadrill’s (SDRL) EBITDA margin is 51.0%.
  • Diamond Offshore Drilling’s (DO) EBITDA margin is 38.5%.

EPS estimate

Wall Street analysts forecast a significant fall in Ensco’s EPS (earnings per share). The estimated EPS is $0.06 lower than its EPS of -$0.09 in 1Q17.

  1. earnings before interest, tax, depreciation, and amortization
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