Why Did Nabors Industries’ 3Q16 Earnings Miss Estimates?



Nabors Industries’ 3Q16 revenues

Nabors Industries (NBR) released its 3Q16 financial results on October 25. The company recorded operating revenues of $519.7 million in 3Q16—down ~40% from ~$847.5 million recorded in 3Q15. Nabors Industries’ revenues for the latest quarter fell mostly due to upstream companies’ lower drilling budget in North America.

Compared to 2Q16, Nabors Industries’ operating revenues fell much less, by 9%, in 3Q16. In comparison, McDermott International’s (MDR) 3Q16 revenues, NBR’s smaller market cap peer, fell ~31% YoY (year-over-year).

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Nabors Industries’ 3Q16 earnings

Nabors Industries’ 3Q16 net EPS (earnings per share) is -$0.35. It fell marginally short of consensus sell-side analysts’ EPS estimate of -$0.34. Despite the higher rig count in North America during 3Q16, the weaker average gross margin caused the company’s earnings to miss analysts’ estimates.

Compared to 3Q15 when Nabors Industries’ adjusted loss was $0.14, the adjusted loss fell more in 3Q16. Nabors Industries accounts for 0.24% of the iShares Core S&P Mid-Cap (IJH).

What impacted Nabors Industries’ reported earnings in 3Q16?

In 3Q16, Nabor Industries’ reported net loss was $111.2 million. It was an improvement compared to 3Q15 when it reported a net loss of ~$296.8 million. YoY, the company’s income improvement reflects lower costs and a steady rig margin in the US. Partially outweighing these factors were the lower rig count and lower rig year driven by lower energy prices. Also, Nabors Industries’ 2Q16 results were negatively impacted by the impairment of its investment in C&J Energy Services. Compared to 2Q16 when Nabors Industries reported a net loss of $184.6 million, its reported earnings improved in 3Q16.

How did it do year-to-date?

In the first nine months of 2016, Nabors Industries’ revenues fell ~53% to ~$1.5 billion compared to the same period in 2015. Its reported earnings fell to a net loss of $694 million in the first nine months of 2016—compared to a net loss of ~$209 million in the first nine months of 2015.

Next, we’ll discuss Nabors Industries’ growth drivers.


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