"Our downgrade reflects concern regarding utilization of portions of its U.S. land fleet in 2015 and risk to dayrates across its U.S. fleet," analysts said.
"We note the challenges NBR faced in utilization in 2012 (even within its AC rigs, albeit largely with the M-Series that is smaller than the more standard 1,500 hp/600+ kips hookload rigs that are being built in the current upcycle) and we reflect some of that relative softness for NBR in our expected rig count declines," analysts continued.
"We note an important risk to our more negative view is NBR's expected cost savings initiative, and we expect to learn more about this early in 2015, but we believe this initiative may be more narrow than we had thought previously-we think the focus is to be on lowering personnel turnover-and we are less optimistic about the potential impact on profitability," analysts added.
Shares of Nabor Industries are down 1.78% to $11.06 in pre-market trading.
Separately, TheStreet Ratings team rates NABORS INDUSTRIES LTD as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NABORS INDUSTRIES LTD (NBR) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NBR's revenue growth has slightly outpaced the industry average of 16.0%. Since the same quarter one year prior, revenues rose by 16.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NABORS INDUSTRIES LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NABORS INDUSTRIES LTD reported lower earnings of $0.51 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus $0.51).
- NBR has underperformed the S&P 500 Index, declining 23.01% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- The gross profit margin for NABORS INDUSTRIES LTD is currently lower than what is desirable, coming in at 34.83%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.84% trails that of the industry average.
- You can view the full analysis from the report here: NBR Ratings Report