Transocean to Report Q1 Earnings: What's in the Offing for the Stock?

Transocean Ltd. RIG is set to release first-quarter 2025 earnings on April 28, after the closing bell.  The Zacks Consensus Estimate for both the top and bottom lines is pegged at $885.84 million and at a loss of 12 cents, respectively.

Let us delve into the factors that might have influenced RIG’s performance in the to-be-reported quarter. Before that, it is worth taking a look at the company’s performance in the last reported quarter.

Highlights of Q4 Earnings & Surprise History

In the last reported quarter, the Switzerland-based oil and gas drilling company’s adjusted net loss missed the consensus mark due to year-over-year higher costs and expenses. RIG posted adjusted net loss of 9 cents per share, which missed the Zacks Consensus Estimate of a profit of 1 cent.  Additionally, adjusted revenues of $952 million missed the Zacks Consensus Estimate of $959 million.

RIG’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed in the remaining two, delivering an average negative surprise of 227.65%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

This is depicted in the graph below: 

Transocean Ltd. Price and EPS Surprise

Transocean Ltd. price-eps-surprise | Transocean Ltd. Quote

 

Trend in RIG’s Estimate Revision

The Zacks Consensus Estimate for RIG’s first-quarter earnings has witnessed two downward movements over the past 30 days. The estimated figure indicates a 300% year-over-year decrease. The Zacks Consensus Estimate for revenues indicates an increase of 15.49% from the year-ago period’s $767 million.

Factors to Consider Ahead of RIG’s Q1 Release

Transocean makes money by providing drilling services for oil and gas companies. It rents out specialized offshore drilling rigs, equipment and workers to help these companies drill wells in the ocean. The company operates a fleet of advanced drilling units, including ones designed for deepwater and rough conditions. RIG earns revenues by charging customers (like big energy companies and governments) for the use of its rigs and services.

Transocean’s revenues are likely to have improved in the quarter to be reported, attributed to the strong performance of its segments. For instance, the Ultra-Deepwater Floaters segment is projected to experience a substantial 16.3% year-over-year expansion, reaching a total of $661.9 million. Furthermore, the Harsh Environment Floaters segment is expected to contribute significantly, with an anticipated 36.7% year-over-year surge, amounting to $223.5 million.

On a bearish note, the increase in RIG’s costs might have dented its to-be-reported quarter’s bottom line. Going by our model, RIG’s total costs and expenses are likely to be up 19.2% year over year to $906 million in the first quarter.

Breaking this down further, Operating and Maintenance costs are expected to see a substantial rise of 17.8% year over year, reaching $616.2 million. Simultaneously, depreciation and amortization expenses are also anticipated to increase 28.5% year over year, amounting to $237.7 million. This upward trend in costs can be largely attributed to the persistent inflationary environment and the challenges posed by a tight labor market.

What Does Our Model Say About RIG?

Our proven model does not predict an earnings beat for Transocean this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

RIG’s Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -12.50%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

RIG’s Zacks Rank:  RIG currently carries a Zacks Rank #3.

Stocks to Consider

Here are some firms from the energy space that you may want to consider, as these have the right combination of elements to post an earnings beat this reporting cycle.

Calgary, Alberta-based oil and gas storage and transportation services provider TC Energy Corporation TRP is scheduled to release earnings on May 1, before the opening bell. TC Energy has an Earnings ESP of +1.66% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

TC Energy is an energy infrastructure company in North America, operating through four segments —— Canadian, the U.S. and Mexico Natural Gas Pipelines, and Power and Energy Solutions. Valued at around $50.85 billion, TC Energy’s shares have gained 37.9% in a year.

Hamilton, HM-based Oil and Gas Drilling services provider Valaris Limited VAL has an Earnings ESP of +21.82% and a Zacks Rank #3 at present. The company is scheduled to release earnings on May 1, ahead of the market open.

The Zacks Consensus Estimate for Valaris’ 2025 earnings per share indicates 600% year-over-year growth. Valued at around $2.19 billion, Valaris and its subsidiaries provide offshore contract drilling services internationally, including in Brazil, the United Kingdom, the U.S. Gulf of Mexico, Australia and Angola, across four segments: Floaters, Jackups, ARO and Other.

Spring, TX-based integrated oil and gas service provider ExxonMobil XOM has an Earnings ESP of +2.08% and a Zacks Rank #3 at present. ExxonMobil is scheduled to release earnings on May 2, before market hours.

Valued at around $464.41 billion, ExxonMobil engages in the exploration and production of crude oil and natural gas in the United States, Canada, the United Kingdom, Singapore, France and globally, operating through its Upstream, Energy Products, Chemical Products and Specialty Products segments.

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This article originally published on Zacks Investment Research (zacks.com).

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