What happened
After Core Labs (CLB) reported first-quarter results, its shares fell as much as 7.8% in early morning trading on Thursday. While those numbers beat expectations, the timing of a recovery in its results and the impact of the Russia-Ukraine conflict weighed on the oilfield service company's outlook.
So what
On the one hand, Core Labs posted better-than-expected first-quarter results. Revenue came in at $115.3 million, up 6% year over year and above its revised guidance range of $110 million-$113 million. Meanwhile, adjusted earnings were $0.08 per share, hitting the top end of its $0.05 to $0.08 per share forecast.
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However, on the other hand, its results were a step back from last quarter and its initial guidance. Core's revenue was $125.1 million in the fourth quarter, while its adjusted earnings were $0.20 per share. Meanwhile, the company initially expected its first-quarter revenue to be between $117 million and $120 million and adjusted earnings of $0.16 to $0.20 per share. It revised those numbers lower due to the impact of the omicron variant during the first quarter and the conflict between Russia and Ukraine. Those issues disrupted its operations in the quarter, including leading it to record $800,000 of bad debt expenses from doubtful accounts receivable from Ukraine clients.
Meanwhile, the company's outlook was a bit light. Despite surging crude prices, the company only sees a modest pickup in drilling activities. While it expects market conditions to strengthen and drive a multi-year growth cycle, it will take time before that flows down to its results. Because of that, the company expects a more modest rise in revenue in the second quarter to $119 million-$125 million. Meanwhile, it sees an earnings improvement to $0.12-$0.16 per share.
Now what
Core Labs sees Russia's invasion of Ukraine causing near-term uncertainty but driving a longer-term cycle of higher drilling activities and demand for its services. Because of that, it expects a more meaningful improvement later this year and beyond. That could give its stock the fuel to rebound if that outlook comes to fruition.
