I understand if Weatherford International (NYSE: WFT) investors said to themselves "this is the quarter where things turn around." After all, both Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL) both posted better-than-expected results thanks to the strength of their North American operations. Weatherford has a sizable presence in North America and the spring break-up period was over in Canada, so why not Weatherford as well?
Unfortunately, Weatherford served up the same thing it has for the past several quarters -- tepid revenue growth and more restructuring programs to get the company back on track -- if it was ever on track in the first place. Here's a look at Weatherford's most recent results and what management has planned to put the company on a path to profitability this time.
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By the numbers
This was yet another quarter in which Weatherford's results were agonizingly stagnant. Third-quarter revenue grew slightly from increased activity in North America, and the company was able to generate a positive operating income result for the first time in a while, but another round of restructuring charges and interest expenses wiped out any chance at positive earnings results. These results stand in stark contrast with Schlumberger and Halliburton, which both produced double-digit revenue growth in North America and significant earnings increases.
Not one of Weatherford's business regions stood out more than the other, but each of them showed some modest level of improvement. The two regions that remain depressed are Latin America and its Land Drilling Rigs business. Latin America has been plagued by issues related to Venezuela, which isn't unique to Weatherford. Also, its land drilling segment has been a sore spot for some time that management has tried to sell.
The one metric that management has focused on for years, even before current CEO Mark McCollum came on board, was generating free cash flow. Yet robust operating cash flow continues to elude the company. The company burned through another $250 million in cash this quarter from restructuring costs, interest expenses, and some litigation costs. Management keeps assuaging investors with the news that it's in compliance with its debt covenants, but that has been the message for several quarters in a row.
What management had to say
CEO Mark McCollum seems to understand that the company needs to get back to free-cash-flow positive, and he highlighted it as a problem he is addressing and how he expects it to happen:
What a Fool believes
Anyone who has followed this company is probably tired of hearing about restructuring and cost-cutting measures to improve profitability. Various management teams at Weatherford have been enacting restructuring programs for more than two years, and the company is no closer to generating significant cash.
McCollum is the company's only appointed CEO since founder and former CEO Bernard Duroc-Danner stepped down late last year. McCollum was previously at Halliburton and is a fresh set of eyes on this company, so perhaps we should give him the benefit of the doubt. However, patience is in short supply among Weatherford investors. If the company can't show significant progress addressing this issue relatively soon, it hardly seems worth investing in this stock.
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