Is the Options Market Predicting a Spike in CORE LABS INC (CLB) Stock?

Core Laboratories Inc. CLB reported third-quarter 2024 adjusted earnings of 25 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 22 cents. This can be attributed to better-than-expected performance from the Reservoir Description and Production Enhancement segments.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

This oilfield service provider’s operating revenues of $134.4 million beat the Zacks Consensus Estimate of $133 million by 1.1%. The top line increased 7.5% from the year-ago quarter’s $125 million.

Core Laboratories Inc. Price, Consensus and EPS Surprise

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

As of Sept. 30, 2024, Core Laboratories' net debt (defined as long-term debt minus cash and cash equivalents) was $120.5 million, reflecting a decrease of $11.8 million during the quarter. The company’s leverage ratio (calculated as total net debt divided by adjusted EBITDA) for the past four quarters improved to 1.47, down from the previous quarter's 1.66.

Segmental Performance of Core Laboratories

Reservoir Description: Revenues in this segment increased about 3.5% to $88.8 million from $85.1 million in the third quarter of 2023. Additionally, the top line beat our projection of $88 million.

Operating income increased from $13 million in the year-ago period to $16.5 million and beat our estimate of $10.4 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 increased 13.4% to $45.6 million from $40.2 million in the prior year quarter. Moreover, the top line marginally beat our estimate of $45.2 million.

Operating income of $3.2 million missed our projection of $4.4 million. However, the metric increased from the year-ago quarter’s reported profit of $1.5 million.

CLB’s Financials and Dividends

As of Sept. 30, 2024, This Zacks Rank #3 (Hold) company had cash and cash equivalents of $21.5 million and long-term debt of $139.9 million. CLB’s debt-to-capitalization was 35.3%. Operating cash totaled $13 million, while capital expenditure amounted to $3 million. This led to a positive free cash flow of $10 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CLB’s board of directors approved a cash dividend of a cent per share on the company's common stock, payable on Nov. 25, 2024, to its shareholders of record as of Nov 4.

Outlook of Core Laboratories

For the fourth quarter of 2024, CLB expects revenues to range from $128.5 million to $135.5 million. Operating income is projected to be between $14.8 million and $17.7 million, with earnings per share expected to be between 20 cents and 25 cents.

Revenues for the Reservoir Description segment are anticipated to be between $87.5 million and $90.5 million, with operating income ranging from $13.4 million to $14.9 million.

Revenues for the Production Enhancement segment are expected to be between $41 million and $45 million, with operating income projected between $1.3 million and $2.7 million.

The company anticipates an effective tax rate of 20% for the fourth quarter. This guidance is based on projections for underlying operations and excludes any gains or losses from foreign exchange. Core Lab anticipates maintaining positive free cash flow in the upcoming quarters.

CLB expects a multi-year recovery in the international market, driven by underinvestment, increased focus on energy security and rising demand for crude oil , which should support growth in 2025. To align with this outlook, management remains focused on investing in technology and pursuing growth opportunities while staying involved in long-term international projects.

The company expects crude oil demand to rise 1-1.6 million barrels per day in 2025, according to estimates from the IEA, EIA and OPEC+. This increase is in addition to the natural decline in production from existing fields, making continued investment in onshore and offshore oil fields necessary.

In the short term, CLB anticipates that crude oil markets will be volatile due to global economic and geopolitical uncertainties. However, as international project activity grows, long-term projects in the Middle East, South Atlantic Margin, certain parts of Asia Pacific and West Africa should boost demand for Core Lab's services and products.

While Core Lab expects the U.S. land activity to decline in the fourth quarter of 2024, it should return to similar levels year over year in 2025. Current challenges include recent Exploration and Production consolidations and low natural gas prices.

For the fourth quarter of 2024, guidance for both segments accounts for delays caused by weather events in the Gulf of Mexico. Core Lab projects that Reservoir Description's revenues will remain flat or increase slightly, while Production Enhancement is projected to continue the drop in U.S. frac spread counts, along with the usual year-end slowdown in onshore completion activity.

Important Energy Earnings So Far

While it is early in the earnings season, there have been a few key energy releases thus far. Let us glance through a couple of them.

Liberty Energy LBRT, the Denver-CO-based oil and gas equipment company, announced an adjusted net income of 45 cents per share, which missed the Zacks Consensus Estimate of 55 cents. This was primarily due to poor equipment and services execution and lower activity in the reported quarter. Additionally, the bottom line declined from the year-ago quarter’s reported figure of 86 cents due to a year-over-year increase in costs and expenses.

Ahead of the earnings release, LBRT’s board of directors announced a dividend of 8 cents per common share payable on Dec. 20, to its stockholders of record as of Dec. 6. This dividend represents a 14% increase from the prior regular quarterly dividend of 7 cents per share. In the quarter, Liberty returned $51 million to its shareholders through a combination of share repurchases and cash dividends.

Energy infrastructure provider, Kinder Morgan, Inc. KMI reported third-quarter adjusted earnings per share of 25 cents, which missed the Zacks Consensus Estimate of 27 cents. The bottom line was flat year over year. The weakness in quarterly results was caused by lower contributions from the Products Pipelines and CO2 business segments.

KMI also announced a quarterly cash dividend of 28.75 cents per share for the third quarter of 2024 (annualized dividend of $1.15), implying a 2% increase from the third-quarter 2023. The dividend is payable on Nov. 15, 2024, to its shareholders of record as of Oct. 31.

Schlumberger Limited SLB, a Houston, TX-based oil and gas equipment and services provider announced third-quarter earnings of 89 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 88 cents. The bottom line also increased from the year-ago quarter’s 78 cents. The strong quarterly earnings were primarily driven by broad-based earnings growth and margin expansion, especially in the Middle East, Asia and offshore North America. Additionally, cost optimization, greater adoption of digital solutions and contributions from long-cycle deepwater and gas projects played significant roles.

SLB reported a free cash flow of $1.81 billion in the third quarter. As of Sept. 30, the company had approximately $4.46 billion in cash and short-term investments. At the end of the quarter, it registered a long-term debt of $11.86 billion.

Zacks Investment Research