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Why Noble Stock Tumbled on Tuesday
Key Points
This happened mainly because several of its rigs are in transition to new contracted work.
Yet the company's backlog grew at an encouraging rate.
Offshore oil drilling company Noble's (NYSE:NE) stock submerged on Tuesday. That followed the release of third-quarter figures after market close the previous day. Ultimately, the stock closed Tuesday's trading session down by more than 5%.
A big splash of red ink
For the quarter, Noble booked $729 million in revenue, down 9% year over year. On the bottom line, the company flipped hard to a net loss. That deficit on an adjusted (non-GAAP) basis was $91.5 million ($0.57 per share), compared with the year-ago period's more than $30 million profit.
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Collectively, pundits tracking Noble were modeling an adjusted net profit of $0.24 per share. At least the company topped the average revenue estimate of slightly under $714 million.
In its earnings release, the company said the quarter was impacted by several of its drilling rigs transitioning to new contracts. On a more positive note, it successfully resumed the operation of its two rigs in Brazil.
Guidance tweaks
Another reason for Tuesday's investor sell-off is Noble's adjustment of certain guidance items. For the entirety of 2026, it's now projecting that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will be $850 million to $900 million. The top end of that range was previously $925 million. Capital expenditures are expected to hit $680 million to $705 million; while that's well above the preceding guidance of $615 million to $665 million, the increase is mainly due to customer-reimbursable expenses.
Management did increase the bottom end of its range for annual revenue. Guidance now stands at $2.85 billion to $2.9 billion; formerly it was $2.8 billion to $2.9 billion.
It's hard to ignore a surprise net loss, but the contract oil drilling space is cyclical. This quarter was, inarguably, a miss for Noble, mostly because of the relatively transitory state of its rig fleet. If I were an investor, I'd keep a sharper eye on the company's backlog, which encouragingly grew by $560 million to $6.7 billion -- $2.6 billion of which is set to convert next year.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Noble Plc. The Motley Fool has a disclosure policy.