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Oceaneering's (OII) Q3 Earnings and Revenues Beat Estimates

Oceaneering International, Inc.OII recently reported third-quarter 2018 adjusted loss of 14 cents per share, narrower than the Zacks Consensus Estimate of 16 cents, thanks to the rise in profit levels from the Advanced Technologies segment.

However, the bottom line compares unfavorably with the prior-year earnings of 3 cents per share. The year-over-year fall in operating income from the energy segments resulted in the decline.

Total revenues of $519.3 million topped the Zacks Consensus Estimate of $492 million. The top line increased about 9.1% from $476.1 million in the prior-year quarter. The upside can be primarily attributed to higher revenues from Subsea Projects and Advanced Technologies.

Oceaneering International, Inc. Price, Consensus and EPS Surprise

Oceaneering International, Inc. Price, Consensus and EPS Surprise | Oceaneering International, Inc. Quote

Segmental Information

Remotely Operated Vehicles: This segment's revenues were around $105 million compared with $104.6 million in third-quarter 2017. The segment generated operating earnings of $772,000 compared with $5 million in the year-ago quarter. Inefficiency in operations, stemming from reactivation of crews and equipment, resulted in the decline.

Subsea Products: The segment's revenues declined to $137.1 million from the prior-year figure of $143.6 million. Operating income tumbled to $5.4 million from $12.4 million generated in the third quarter of 2017. Notably, backlog at the end of the quarter was $333 million, higher than the prior-year figure of $284 million.

Subsea Projects: Revenues from this segment amounted to around $105 million compared with $80.1 million recorded in the year-ago quarter. The segment generated operating income of $6.1 million, backsliding from $6.5 million recorded a year ago. Delayed execution caused by field trials and equipment modifications affected the results of Ecosse Subsea, which in turn impacted the segment's overall results.

Asset Integrity: The segment's revenues totaled $62.3 million, higher than the year-ago quarter's recorded figure of $61.1 million. Operating income declined to $2.3 million from $3.1 million in the prior-year quarter. The decline was caused by delays in expected project awards from its clients.

Advanced Technologies: Revenues from this segment were around $109.8 million, higher than $86.7 million in third-quarter 2017. As such, operating income rose to almost $9 million from $6.6 million in the year-ago quarter. The results of the segment were positively impacted by rising project throughput in Oceaneering's commercial theme park unit.

Capital Expenditure

Including acquisitions, capital expenditure in the third quarter was $30.4 million. Notably, capital expenditure amounted to $152.3 million in the first nine months of 2018.

Balance Sheet

As of Sep 30, 2018, Oceaneering had cash and cash equivalents of $797.5 million, and a long-term debt of around $782.2 million. The debt-to-capitalization ratio of the company was 34.3%.

Guidance

Due to a fall in offshore activities, Oceaneering expects fourth-quarter results to decline from the third-quarter level. While all the energy segments are expected to witness lower sequential operating income, Subsea Products and Subsea Projects segments are likely to be hit the hardest. Moreover, the effects of Hurricane Michael are also expected to negatively impact Subsea Products' results. However, non-energy segment Advanced Technologies is expected to witness a rise in operating income.

The company expects its adjusted EBITDA toward the lower end of the previously announced guidance range of $140-$160 million. All the operating segments are expected to record positive EBITDA for 2018. Oceaneering anticipates that rising activities in the energy sector in 2019 will enable it to boost its top line in the next year.

Zacks Rank & Key Picks

Currently, Houston, TX-based Oceaneering has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks given below:

El Dorado, AR-based Murphy Oil Corporation MUR carries a Zacks Rank #1 (Strong Buy). The company's sales for 2018 are expected to grow more than 20% from 2017. You can see the complete list of today's Zacks #1 Rank stocks here .

Brazilian state-run Petroleo Brasileiro S.A. or Petrobras PBR has a Zacks Rank #2 (Buy). Its earnings for 2018 are expected to surge more than 100% from the 2017 level.

Woodlands, TX-based Anadarko Petroleum Corporation APC holds a Zacks Rank #2. The company's earnings for 2018 are expected to surge more than 250% year over year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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