Report
Preston Caldwell
EUR 850.00 For Business Accounts Only

Morningstar | Core Lab Posts Solid First-Quarter Results in Line With Expectations

Core Lab posted solid fourth-quarter results, about in line with our and consensus' expectations. Revenue fell 2% sequentially due to normal seasonality in the Reservoir Description segment plus U.S. shale activity weakness affecting the Production Enhancement segment. Adjusted operating margin slipped slightly to 15.6% from 16.4% previously. Our fair value estimate and wide moat rating are unchanged.

On the bottom line, we were negatively surprised by the 230-basis-point sequential decrease in Reservoir Description margins. Conversely, we were positively surprised by the 150-basis-point sequential improvement in Production Enhancement margins (despite a 1% revenue drop). Management attributed this latter result to customer uptake of Core Lab's premium priced perforating systems.

Although Reservoir Description revenue has remained flat for the last two years, management is guiding for a belated recovery to occur in the second half of 2019, leading to segment revenue increasing "mid- to high-single-digits" year-over-year for 2019 as a whole. Meanwhile, management touted the benefit in coming years of breaking into new segments of the perforating market that constitutes the bulk of the Production Enhancement segment, but we think growth in this segment will be moderate as U.S. shale activity flattens out.
Underlying
Core Laboratories NV

Core Laboratories is a holding company. Co. is a provider of reservoir description, production enhancement and reservoir management services to the oil and gas industry. Co. has three segments: reservoir description, which encompasses the characterization of petroleum reservoir rock, fluid and gas samples; production enhancement, which includes products and services relating to reservoir well completions, perforations, stimulations and production; and reservoir management, which combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from its clients' reservoirs.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Preston Caldwell

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