Core Labs Beats But Profit Dips

Oilfield services provider Core Laboratories N.V. (CLB: 123.42 0.00 0.00%) reported better-than-expected fourth quarter results, driven by robust demand for its products and rebound in North American activity levels. Earnings per share, excluding special items, came in at $1.25, surpassing the Zacks Consensus Estimate by 5 cents.
 
Despite the ongoing recovery, the company continues to feel the pressure from the still depressed pricing and sales. As a result, on a year-over-year basis, Core Labs’ earnings per share declined 17.2% (from $1.51 to $1.25), while revenue was down 9.7% to $181.6 million.
 
Earnings Surprise Trend
 
This was the company’s third positive earnings surprise in the past four quarters. Core Labs has performed modestly well during this period, with its average earnings surprise being 1.9%. This implies that the company has exceeded the Zacks Consensus Estimate by 1.9% over the last four quarters.
 
Reservoir Description Segment
 
Revenue for the Reservoir Description segment (which focuses on international crude oil related projects) was down slightly (by 1.2%) year over year to $107.5 million, as the company continues with its de-emphasis on the Venezuelan operations. As a result, the unit posted modestly lower operating income, which was down 3.1% to $23.4 million.
 
Production Enhancement Segment
 
Core’s Production Enhancement revenue decreased approximately 19.0% year over year to $61.1 million, while segment operating income was down 16.7% to $17.7 million. Concentrated in North America, the segment suffered from the region’s weak drilling activity. However, both sales and profitability were up sequentially, as prices and activity levels in North American continue to recover from their lows.
 
Reservoir Management Segment
 
Revenue from the Reservoir Management operations (also internationally focused) was down 23.6% year-over-year to $13.0 million, while the segment operating income decreased 30% to $4.2 million, mainly attributable to the mix of activity in the company’s consortium projects and timing of analysis work on these projects.
 
Free Cash Flow & Balance Sheet
 
During the quarter, Core generated $29.7 million in free cash flow, taking the full-year total to $164.6 million (an all-time yearly high). Capital expenditures for the December quarter were $7.3 million. As of Dec. 31, 2009, the company had $181 million in cash (the highest quarter-end total).
 
Guidance
 
Management guided towards first quarter 2010 revenue of approximately $180 million, while earnings per share are likely to be between $1.20 and $1.25.