CLB's Q4 Earnings Beat Estimates, Sales Lag, Expenses Increase

Core Laboratories Inc. CLB reported fourth-quarter 2024 adjusted earnings of 23 cents per share, which beat the Zacks Consensus Estimate of 21 cents. The bottom line also increased from the year-ago quarter’s reported figure of 19 cents. This can be attributed to the better-than-expected performance of Reservoir Description segment.

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This oil-field service provider’s operating revenues of $129.2 million missed the Zacks Consensus Estimate of $131 million by 1.4%, due to poor year-over-year performance from its Production Enhancement segment. However, the top line increased 0.9% from the year-ago quarter’s $128 million. This can be attributed to the Reservoir Description segment’s impressive performance.

During the fourth quarter, the company repurchased 264,982 shares of common stock for a total of $4.9 million. Additionally, the company reduced its debt leverage ratio to 1.31 and decreased net debt by $11.7 million.

As of Dec. 31, 2024, the company's leverage ratio, calculated as total net debt divided by adjusted EBITDA for the last four quarters, decreased to 1.31, improving from 1.47 as of Sept. 30, 2024.

Core Laboratories Inc. Price, Consensus and EPS Surprise

Core Laboratories Inc. price-consensus-eps-surprise-chart | Core Laboratories Inc. Quote

Segmental Performance of Core Laboratories

Reservoir Description: Revenues in this segment increased about 2.1% to $86.8 million from $85 million in the fourth quarter of 2023. However, the top line missed our estimation of $$88.2 million.

Operating income increased from $12 million in the year-ago period to $16.5 million and beat our estimate of $12.6 million. This was due to increased demand for reservoir rock and fluid analysis in international and U.S. markets.

Production Enhancement: This segment’s revenues decreased 3.6% to $42.4 million from $44 million in the prior year quarter. Moreover, the top line missed our estimate of $42.7 million.

Operating loss of $2.6 million was below our estimate of an operating income of $3.6 million. This decrease was primarily due to lower U.S. onshore completion activity, which led to a reduction in product sales. The metric decreased from the year-ago quarter’s reported profit of $2.2 million.

Costs & Expenses of CLB

CLB reported total costs and expenses of $115.1 million in the fourth quarter, increasing 1.3% from the year-ago quarter’s level. The figure was slightly lower than our estimation of $115.2 million.

CLB’s Financials & Dividends

As of Dec. 31, 2024, The company had cash and cash equivalents of $19.2 million and long-term debt of $126.1 million. CLB’s debt-to-capitalization was 32.9%.

Net cash provided by operating activities totaled $20.6 million, while capital expenditure amounted to $4.4 million. This led to a positive free cash flow of $16 million.

Core Laboratories’ board of directors declared a quarterly dividend of 1 cent per share to its common shareholders of record as of Feb. 10. The payout, which is unchanged from the previous quarter, will be made on March 3.

CLB’s Management Remarks & Outlook

Core Laboratories anticipates that alongside geopolitical risks and recently expanded sanctions, typical seasonal industry patterns are likely to result in a decline in some regions’ activity during the first quarter of 2025. Severe weather in the United States and Mediterranean regions led to the suspension of client activities and facility closures.

For the first quarter of 2025, CLB expects revenues to range from $121 million to $127 million. Operating income is anticipated to be between $10.2 million and $12.8 million, with earnings per share expected to be between 12 cents and 16 cents.

Revenues for the Reservoir Description segment are anticipated to be between $82 million and $85 million, with operating income ranging from $9 million to $10.7 million. In the first quarter of 2025, onshore U.S. drilling and completion activity was negatively affected by freezing conditions and continued decline throughout January. However, activity is expected to improve as the quarter progresses.

Revenues for the Production Enhancement segment are expected to be between $39 million and $42 million, with operating income predicted between $1.1 million and $2 million.

The company anticipates an effective tax rate of 25% for the first quarter. This change in the effective tax rate is expected to increase income tax expense by approximately $500,000. The company's guidance for the first quarter of 2025 is based on estimations for underlying operations and excludes any gains or losses from foreign exchange.

CLB expects to keep generating positive free cash flow in the coming quarters. The company will focus on its strategic goals and work on reducing debt. CLB will also continue to evaluate how to best use its free cash flow.

Management expects that as 2025 progresses, Core Laboratories will continue executing its strategic plan, with a focus on technology investments that are designed to address client needs and unlock growth opportunities. While operators adopted a more cautious stance in the second half of 2024 due to concerns over potential imbalances in crude oil supply and demand, Core Laboratories remains confident in the long-term outlook for international upstream projects through 2025 and beyond.

Industry forecasts from the IEA, EIA and OPEC+ project crude oil demand growth of approximately 1.1-1.4 million barrels per day in 2025 in addition to the natural decline in output from existing fields. This indicates a sustained need for investment in the development of onshore and offshore oil fields to meet future demand.

In the near term, the company expects crude oil markets to remain volatile, due to global economic uncertainties and geopolitical risks. Expanded sanctions in January 2025 disrupted crude oil trading and the demand for laboratory testing services, while broadening restrictions on product sales and services to additional entities.

Looking forward, CLB expects to stay actively involved in long-term international projects. Activity in these projects is likely to remain stable with significant upstream developments in regions such as the South Atlantic Margin, North and West Africa, Norway, the Middle East. Parts of Asia Pacific likely to drive mid-single-digit year-over-year growth in demand for Core Laboratories’ services and products. In the United States, onshore activity is expected to remain flat or show slight declines compared with 2024.

CLB’s Key Projects & Technology Advancements

In the fourth quarter of 2024, CLB completed a study for a Middle Eastern National Oil Company (“NOC”) using its special Nuclear Magnetic Resonance (“NMR”) technology. The study used both High and Low Frequency NMR instruments to analyze reservoir rocks at different temperatures. By using different NMR frequencies and other advanced methods, Core Laboratories’ scientists were able to separate movable liquid hydrocarbons from immovable solid ones in the rock samples.

This is something traditional down-hole log methods often struggle to do. Without Core Laboratories’ analysis, NOC might have overestimated the recoverable reserves in the area it was studying.

CLB worked with an oilfield services company in Southeast Asia to boost productivity from a low-permeability gas reservoir at the same time. The company used Core Laboratories’ STIMGUNTM propellant technology, which combines conventional perforating methods with high-energy stimulation to improve permeability near the well. This technology created fracture networks, leading to a 55% increase in expected natural gas production.

Also, the company helped an operator from Canada identify oil flow from a well with multiple horizontal legs. By using Core Laboratories' FlowProfiler oil tracers, the operator confirmed oil production from 87% of the traced legs after 30 days. CLB also introduced FlowProfiler water tracers to help operators track both oil and water production from each horizontal leg.

The company currently has Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Important Earnings at a Glance

While we have discussed CLB’s fourth-quarter results in detail, let us take a look at three other key reports of this space.

Oil and gas equipment and services provider Liberty Energy LBRT reported a fourth-quarter 2024 adjusted net income of 10 cents per share, which marginally beat the Zacks Consensus Estimate of 9 cents, due to a year-over-year decrease in costs and expenses. However, the bottom line underperformed the year-ago quarter’s reported figure of 54 cents, due to poor equipment and service execution, along with lower activity.

As of Dec. 31, Liberty had approximately $20 million in cash and cash equivalents. The pressure pumper’s long-term debt of $190.5 million represented a debt-to-capitalization of 8.8%.

Another oil and gas equipment and services provider Halliburton Company HAL posted a fourth-quarter 2024 adjusted net income per share of 70 cents, same as the Zacks Consensus Estimate but below the year-ago quarter’s profit of 86 cents (adjusted). The numbers indicated softer activity in the region of North America, partly offset by improved fluid work in the Gulf of Mexico.

As of Dec. 31, 2024, the company had approximately $2.6 billion in cash/cash equivalents and $7.2 billion in long-term debt, representing a debt-to-capitalization ratio of 40.4. The company generated $1.5 billion of cash flow from operations in the fourth quarter, leading to a free cash flow of $1.1 billion.

Energy infrastructure provider Kinder Morgan KMI reported fourth-quarter adjusted earnings per share of 32 cents, shy of the Zacks Consensus Estimate of 33 cents. The lower-than-expected quarterly earnings were primarily due to decreased volumes on certain systems, asset divestitures and lower crude, CO2 and NGL volumes. KMI’s fourth-quarter DCF was $1.3 billion, up from $1.2 billion a year ago.

As of Dec. 31, 2024, Kinder Morgan reported $88 million in cash and cash equivalents. Its long-term debt amounted to $29.8 billion at the quarter-end. For 2025, Kinder Morgan anticipates a net income of $2.8 billion, up 8% from the prior-year level, and an adjusted EPS of $1.27, up 10%. The company expects to declare dividends of $1.17 per share, up 2% from the prior-year figure. It also anticipates budgeted adjusted EBITDA of $8.3 billion, up 4% from the previous-year level.

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