Weatherford Lags EPS, Beats Rev. - Analyst Blog
16 Março 2012 - 5:15AM
Zacks
Leading oilfield services’
company Weatherford International Ltd.’s
(WFT) fourth quarter 2011 adjusted earnings of 2 cents per share
came in way below the Zacks Consensus Estimate of 32 cents. The
results also dropped substantially from the year-earlier loss of 16
cents.
For full-year 2011, the company’s
profit of 34 cents per share lagged the Zacks Consensus Estimate of
84 cents. However, the reported figure was above the year-earlier
loss of 20 cents per share.
Total revenue increased more than
26% year over year to $3,709.0 million, surpassing the Zacks
Consensus Estimate of $3,601 million. Full-year 2011 total revenue
increased by more than 27% year over year to $12,990 million but
failed to meet our expectation of $12,881 million.
The company has restated its prior
results as a result of inadequate internal controls related to
taxes.
Operational
Performance
North American
revenue climbed 34.4% year over year to $1,698.4 million.
Artificial Lift, Stimulation and Chemicals as well as Drilling
Services made strong contributions. Robust activity in the U.S. was
the primary growth driver. The segment posted an operating income
of $381.8 million compared with $262.9 million in the year-ago
quarter.
Middle East/North
Africa/Asia revenue decreased 1.4% year over year to
$675.2 million. The decline was mainly the result of the political
turbulence in Libya, Algeria, and Egypt, including deconsolidation
of three joint ventures and a slowdown in Algerian activity. The
segment’s operating income plummeted nearly 11% year over year to
$43.7 million.
Europe/West
Africa/FSU posted revenue of $608.6 million, up 15.2% year
over year. The segment’s operating income shot up 26.6% year over
year to $81.5 million. Strong performance in Russia, Kazakhstan and
Nigeria aided the revenue growth.
Latin American
revenue climbed 63.1% year over year to $727.5 million, buoyed by
Mexico, Venezuela and Columbia. Operating income from this segment
expanded significantly to $112.2 million from the year-ago level of
$52.2 million.
Liquidity
As of December 31, 2011,
Weatherford had $371 million in cash and cash equivalents and
long-term debt was $6,286.3 million, representing a
debt-to-capitalization ratio of 39.7%. Weatherford spent
approximately $1.5 billion in capital expenditures during 2011 and
expects to spend between 10% and 15% of its revenues this year.
Guidance
The company expects its first
quarter 2012 adjusted earnings per share to be approximately 30
cents. With respect to 2012, the company maintained a positive
outlook for its North American business. The company believes that
the depressed natural gas environment will likely be overshadowed
by the predominance of oil activity in Canada and the U.S.
Weatherford foresees sustained
growth and expanding margins in its Latin America region,
underpinned by improvements in Argentina, Brazil, Colombia, Mexico
and Venezuela.
The company also expects
improvements in the Eastern Hemisphere in 2012, with upside in
Europe and Russia, as well as stronger activity levels in Iraq,
Kuwait and Saudi Arabia, Australia and China.
Our
Recommendation
Although we remain optimistic on
Weatherford’s operational and financial leverage to international
growth in 2012, the company’s debt-heavy balance sheet, its weak
capability to generate free cash flow as well as competition from
larger peers such as Schlumberger Limited (SLB)
are causes of concern.
Weatherford holds a Zacks #3 Rank,
which translates into a Hold rating for a period of one to three
months. Consequently, our long-term Neutral recommendation remains
unchanged at this stage.
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
WEATHERFORD INT (WFT): Free Stock Analysis Report
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