UPDATE: J.P. Morgan Reiterates Overweight Rating, Lowers PT on Noble Corporation
In a report published Monday, J.P. Morgan reiterated its Overweight rating on Noble Corporation (NYSE: NE), but lowered its price target from $48.00 to $45.00.
J.P. Morgan noted, “NE reported adjusted 4Q12 EPS of $0.51, below both JPM/cons $0.61/0.62 estimate, with $0.07 of the miss from a higher tax rate of ~28% vs. our 19% target as the FY12 20.9% came in above mgmt's high end of 17-20% guidance range. While contract drilling revenues of $922mm was 2% higher than our target, contract drilling expenses of $484mm was a larger miss than we expected (6% higher than our $458mm target and 6-9% higher than mgmt's $445-455mm guide). Like 3Q, the cost miss was from start-up delays and other operational issues as five newbuilds and enhanced rigs accounted for 33% of downtime. On the positive side, NE announced contracts for two more newbuild jackups and indicated construction milestones were as expected for the next 3 contracted newbuild drillships and 3 jackups, including the Regina Allen for 3Q13 delivery. These rig specific delays will get worked out quickly, but execution concerns and two straight cost misses raise our concern that the company could miss its cost target again. We are currently modeling 1Q13 costs at the high end of mgmt's $485-495mm, while our FY13 is at the midpoint of mgmt's $2.05-2.15bn guidance range. We also lowered our estimated bonus revenue for the fleet to incorporate mgmt's 3.5-4.0% operational downtime guidance, which lowers our 2013/14E EPS to $2.95/4.75 from $4.10/5.70.”
Noble Corporation closed on Friday at $38.23.
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