CLB: Couldn't tell if you have access to RBC's research or not, but here's the front page, fwiw. I can send more of it later, if you'd like.
Basically I think the share price just got a bit ahead of itself, more than any fundamental operational issue.
Also, I think I saw that the transcript of the CC (which occurred after this opinion was issued) was posted on SA.
Sector Perform (prev: Outperform) Average Risk
Event. 2Q11 results and rating revision
Lowering rating to Sector Perform from Outperform. We believe risk/reward is more neutral given recent share price gains and limited prospects for material upward earnings revisions in the near term.
• Shares have increased 21% over the past ~3 months versus -1% for the OSX, pushing valuation toward the higher end of historical ranges. Although we believe CLB will continue to garner a premium, we see limited multiple upside in the near term. Please see pages 2-3.
• As our estimates suggest, our outlook for 2H11/2012 is relatively unchanged and we do not expect consensus numbers to move up materially in the near term. Please see page 4.
• Shares will, however, remain on our radar screen, as we await a more attractive entry point as the attributes that factored into our Outperform rating still hold (superior returns, leading market positions in tech-driven products/services, and solid execution).
After the close Wednesday, CLB reported 2Q11 EPS of $0.90, ex-items, versus consensus of $0.88. Relative to our $0.87 estimate, upside was driven primarily by a lower tax rate (we estimate added 3-4 cents). Operating results came in slightly below our forecast due primarily to Production Enhancement revenue/margins, which were negatively impacted by a number of transitory issues (Bakken weather, project delays, and mix). Conference call on Thursday, July 21, at 8:30 a.m. ET; dial-in 877-548-0717; passcode 78934308.
Guided 3Q and full-year 2011 consistent with the Street. CLB expects 3Q and full-year 2011 EPS of $0.98-1.00 and $3.65-3.72 versus consensus of $0.98 and $3.69, respectively. The company did say that 3Q results could be negatively impacted by as much as $0.04/share depending on the severity of a vendor shortage of tubulars utilized in its perforating systems (fire at the vendor’s facility).
Estimate and Price Target Revisions. No change to our 2H11 EPS estimates as higher revenue and a lower tax rate assumption offset lower margins. For 2012, our new estimate is $4.86, up from $4.76, as higher revenue/lower tax rate more than offset lower margins. We are raising our price target to $117 (from $110) to account for a higher target multiple (24x versus prior 23x) and 2012 expectations.
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