Tidewater results beat the Street

NOVEMBER 4, 2014 — Offshore services giant Tidewater Inc. (NYSE:TDW) reported second quarter net earnings for the period ended September 30, 2014, of $60.9 million, or $1.22 per common share, on revenues of $397.5 million. For the same quarter last year, net earnings were $54.2 million, or $1.09 per common share, on revenues of $367.9 million. The immediately preceding quarter ended June 30, 2014, had net earnings of $43.7 million, or $0.88 per common share, on revenues of $385.7 million.

The results beat analyst's expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.06 per share. The posted revenue of $397.5 million in the period, also beat forecasts. Analysts had expected $392.8 million, according to Zacks.

"We believe the company's earnings release has modestly positive implications for the stock," commented Cowen & Co. "EPS of $1.14 exceeded our $1.07 estimate and consensus of $1.06. Adjusted EBITDA of $125 million was above our $118 million estimate as a vessel operating margin of 46.5% comfortably exceeded the 43-45% guidance and our 45.5% expectation.

"Tidewater reported EPS from continuing operations of $1.14 compared with our estimate of $1.07 and consensus of $1.06. Results exclude a $0.09/share foreign exchange gain. A higher-than-expected tax rate negatively affected the quarter by $0.03 compared to our estimate. Total revenues of $398mm exceeded our $392mm estimate, and vessel revenues of $391mm exceeded the company's guidance of $380-$390mm provided on the F1Q conference call. The revenue outperformance was driven by strength in the Americas and Asia Pacific regions, which was only partially offset by lower-than-anticipated results in the Middle East and Sub-Saharan Africa segments."

Vessel operating costs of $213 million were slightly below Cowen's $214 million forecast, but were within the guidance range.

"While repair and maintenance expenses were expected to decline in 2Q15, the decline to $39.3 million from $47.7 million in 1Q15 was a greater decline than expected and could indicate a deferral of some R&M expenses to later quarters," says Cowen. "The vessel cash operating margin of 46.5% exceeded our 45.5% estimate and was ahead of the 43-45% guidance. As a result, operating income of $81 million came in ahead of our $78 million forecast. G&A of $47 million was below both our $49 million forecast and the guidance range of $48-$50 million

"The company-wide average dayrate of $19,415 in F2Q15 exceeded our $18,775 estimate," says Cowen. "Deepwater dayrates of $31,001 were comparable to our $30,807 forecast, while towing-supply dayrates of $15,987 were 2.3% above our expectation of $15,627 and were up 4.8% sequentially.

"Americas revenue of $134.0 million was more than 10% higher than our $120.6 million forecast, driven by both higher-than-expected utilization (81% vs. our 76% forecast) and dayrates ($22,701 vs. our $21,990 estimate).

"Asia/Pacific revenue of $46 million was slightly higher our $43.3 million estimate. Utilization was significantly higher than our estimates (90% vs. 78%) was only partially offset by weaker dayrates than we had forecast ($23,090 vs. $24,189).

"Middle East/North Africa sales of $48.8 million came in well below our $58.2 million projection as weaker-than-expected utilization in the company's towing supply segment weighed on the quarter. Average dayrates totaled $16,040 in the quarter compared with our $15,769, boosted by higher rates in the towing supply segment ($14,171 vs. $13,633)."

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