Nabors Industries versus peers and the industry
Nabors Industries (NBR) is one of the largest land-based drilling operators in the world. It had a weak run in the stock market in 2017. On November 15, NBR was trading at $5.78, which was ~65% lower than its price since the beginning of 2017. On August 14, Nabors Industries disclosed that it signed an agreement to acquire its oilfield equipment and services (or OFS) industry peer Tesco Corporation (TESO). The acquisition hasn’t completed yet. Read more in Market Realist’s Can Nabors Bank on Synergies from Tesco?
The VanEck Vectors Oil Services ETF (OIH) has fallen 28% since the start of 2017. OIH is an ETF tracking an index of 25 OFS companies. NBR is 1.8% of OIH. Schlumberger (SLB), the largest OFS company in the United States, has fallen ~27% year-to-date. West Texas Intermediate (or WTI) crude oil prices have risen 3% during this period. Despite higher crude oil prices, NBR’s peer Weatherford International (WFT) has fallen 30% year-to-date. The S&P 500 Index (SPX-INDEX) rose 15% year-to-date.
What Nabors Industries’ stock price movement tells us
Nabors Industries’ one-year stock price trended up until January 2017 and then lost steam and fell. Although NBR’s top-line improved in the past three quarters up to 3Q17, its net income and free cash flow have been in the red in the past three quarters. Crude oil prices strengthening since July couldn’t turn things around for NBR’s stock price. Despite the merger agreement with Tesco Corporation, NBR’s weak run continues unabated in the stock market.
Nabors Industries’ moving averages
On November 15, Nabors Industries’ stock price was at a ~17% discount to its 50-day moving average (or DMA). It was trading 40% below its 200-day moving average. Moving averages exhibit a smoother trend following the stock’s price movement.
NBR’s short-run MA has fallen below its long-run MA since the second week of May 2017, which implies that bearishness has set into NBR’s stock price. NBR’s stock price has fallen below its short-run MA since October 2017, which indicates that NBR’s share price is facing a short-term headwind as well. A 50 DMA is a short-term MA, while a 200 DMA exhibits a long-term trend.
In this series, we’ll analyze Nabors Industries’ fundamental drivers, industry drivers, NBR’s balance sheet, and free cash flow. Next, we’ll discuss Nabors Industries’ management comments.