EUR 850.00 For Business Accounts Only

Morningstar | Frank's Delivers Solid Bottom-Line Results in 3Q

Frank's International delivered solid third-quarter results. Although revenue slipped 2% lower sequentially because of a temporary lull in international services segment projects, overall company EBITDA margins improved to 9% from 8%. Management is maintaining strong guidance for international markets growth in 2019 broadly as well as robust growth from the Blackhawk segment (added to the company in late 2016), in line with our expectations. Our fair value estimate and narrow moat rating are unchanged.

The profitability improvement for Frank's was due primarily to the U.S. services segment, where EBITDA margins strengthened to negative 2% from negative 18% sequentially. About half of that improvement can be attributed to the company's general and administrative cost-cutting measures, as all of corporate G&A expense is reported within the U.S. services segment results. Additionally, U.S. services benefited from continued strengthening in U.S. land pricing and improved mix in the Gulf of Mexico market.

The strengthening pricing in U.S. services is encouraging for Frank's; in our view, it reflects a structural shift in the tubular running services industry as Weatherford and Nabors restructure their own operations. However, it will be even more important to see whether this trend plays out in the international services segment in 2019 as activity levels pick up.