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The oil-field technology company expects results to keep getting better next year.
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A year ago, Core Laboratories' (CLB +0.00%) financial results finally began recovering after tumbling amid a prolonged downturn in the oil market. At the time, the company expected more of a V-shaped recovery, with earnings and profitability bouncing back sharply in 2017. While results did rebound, the recovery's pace wasn't quite as brisk as anticipated. However, the slow grind higher did continue in the fourth quarter.
|
Metric |
Q4 2017 |
Q3 2017 |
Quarter-Over-Quarter Change |
|---|---|---|---|
|
Revenue |
$171.9 million |
$166.2 million |
3.4% |
|
Net income |
$21.7 million |
$21.1 million |
2.9% |
|
EPS |
$0.49 |
$0.48 |
2.1% |
Data source: Core Labs. EPS = earnings per share.
Image source: Getty Images.
The steady upward climb continued.
One of the things management highlighted in the earnings press release was the margin improvement during the quarter. It noted that "operating margins for the company increased 400 basis points ('BPS') year over year and sequentially 200 BPS to 19%." That improvement is why the company's adjusted earnings rose 21% over the third quarter while revenue was up only about 3%. Management pointed out that the "improving margins were a result of higher-technology services and products being requested by Core's technologically sophisticated client base and improved utilization of our facilities."
While Core's financial results have steadily recovered for the past year, the company expects to take a breather next quarter because of the typical seasonal slowdown in the industry. As a result, it sees revenue slipping to a range of $168 million to $172 million and earnings dipping to $0.56 to $0.58 per share. However, at the midpoint, that forecast represents an 8% increase in revenue and a 36% boost in earnings over last year.
The company then expects its rebound to reaccelerate, especially in the second half as it benefits from the early stages of a recovery in international and offshore markets. That's because those markets will "return to growth for the first time since 2014," according to an executive at oil-service giant Schlumberger (SLB +0.01%). As a result, "after three very tough years, it is now clear that the tide is clearly turning in favor of Schlumberger," according to comments from its CEO. As that recovery takes hold, it will not only benefit companies like Schlumberger but also should help push Core's margin back up toward its historically higher levels and drive earnings even higher.
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