Global offshore drilling contractor
Transocean Ltd.
(
RIG
) reported better-than-expected second-quarter 2012 results on
August 1, 2012, with both revenue and earnings per share improving
year over year.
We cover below the results of the recent earnings announcement,
subsequent analyst estimate revisions and the Zacks ratings for the
short-term and long-term outlook for the stock.
Second Quarter Recap
The quarter's earnings per share (excluding transaction costs) came
in at 72 cents, significantly ahead of the Zacks Consensus Estimate
of 44 cents and the year-ago adjusted profit of 50 cents.
Quarterly revenue of $2,575.0 million were up 10.3% year over year
and also surpassed the Zacks Consensus Estimate by 3.7%, mainly
fueled by better efficiency on high-spec floaters and a dip in the
number of shipyard days.
Agreement of Analysts
Looking at the estimates' revision trend, it becomes clear that
most of the analysts project a mixed outlook for Transocean through
the balance of 2012.
Of the total 19 analysts covering the stock, 4 have raised their
estimates and 13 have moved in the opposite direction over the last
30 days. In the last 7 days, two analysts revised the estimates
downward, while none increased.
For fiscal 2012, 8 analysts (out of 18 covering the stock) have
upped their estimates in the last 30 days, while 3 analysts went
for downward revisions. However, over the last 7 days, only one
analyst decreased the earnings estimate, as against no upward
revision.
The estimate revisions for the upcoming quarter and full-year 2012
indicate the analysts' sentiment based on the company's
technologically-advanced and versatile offshore drilling fleet,
strong backlog and considerable pricing power. However, the
not-so-favorable oil and natural gas market conditions along with
operational issues - such as fluctuating dayrates and high costs -
continue to be an overhang on the company's shares.
Magnitude of Estimate Revisions
Reflecting the influence from analysts' earnings revision, in the
last 30 days, the Zacks Consensus Estimate for the second quarter
dropped to 82 cents from 88 cents. Seven days ago, the earnings
estimate was 83 cents.
For the full year, the earnings estimate moved up to $3.00 from
$2.94, over the last 30 days. A week before, the estimate recorded
was $3.01.
Earnings Surprise
With respect to earnings surprise, Transocean showed mixed trend in
the last 4 quarters. The company recorded a minimum surprise of
negative 96.0% in the third quarter of 2011 to the maximum of
112.5% in the first quarter of 2012. On average, the earnings
surprise was a positive 17.7%.
Our Recommendation
Switzerland-based Transocean is the world's largest offshore
drilling contractor and the leading provider of drilling management
services worldwide. The company's drillships are contracted by oil
biggies such as
Chevron Corporation
(
CVX
),
Royal Dutch Shell plc
(
RDS.A
) and
BP plc
(
BP
).
We are maintaining our Neutral recommendation on the stock, as we
see limited upside over the near term. Transocean currently retains
a Zacks #3 Rank, (short-term Hold rating).
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years
ago that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use today.
The Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months). These
"Earnings Estimate Scorecard" articles help analyze the important
aspects of estimate revisions for each stock after their quarterly
earnings announcements. Learn more about earnings estimates and our
proven stock ratings at:
http://www.zacks.com/education/
BP PLC (BP): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis
Report
TRANSOCEAN LTD (RIG): Free Stock Analysis
Report
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