Core Laboratories Inc. CLB is an oilfield services company, operating in more than 50 countries, providing reservoir management and production enhancement to oil and gas companies. Despite a challenging market, CLB's shares have risen 13.9% year to date (YTD), outperforming the broader oil and energy sector's 8.2% growth. Additionally, CLB has not only surpassed the Field Services sub-industry but has also outperformed competitors like ProFrac Holding Corp. ACDC and Tetra Technologies TTI.
 

YTD Price Comparison

Image Source: Zacks Investment Research

As illustrated in the chart above, CLB's impressive double-digit share performance can be attributed to several key factors. Let’s explore the driving forces behind its success and why the stock stands out in this challenging market.
 

Promising Earnings Growth

The Zacks Consensus Estimate indicates that CLB’s earnings per share are projected to be 95 cents for 2024 and $1.33 for 2025. This translates to impressive year-over-year growth of 18.75% and 39.65%, respectively. The optimistic outlook reflects the company’s strong fundamentals and growth potential.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Image Source: Zacks Investment Research

Positive Momentum in Operating Income

Core Laboratories’second-quarter 2024 results highlighted improved profitability and financial health. Operating income increased 10% sequentially to $16.4 million and free cash flow (“FCF”) was $14.3 million. The company also reduced its net debt by $15.8 million in the quarter, bringing CLB’s leverage ratio to the lowest in five years.

Image Source: Core Laboratories Inc.

Continued Growth in International Markets

CLB’s management expects continued growth, especially in international markets. Increased investments in onshore and offshore oil fields have been driving this trend.  Crude oil demand is projected to rise 1-2 million barrels per day in 2024 and 2025. This growing demand is likely to keep pushing CLB's revenues and profits upward. As shown in the picture below, the Zacks Consensus Estimate indicates that CLB’s sales are projected to be $531.72 million for 2024 and $573.88 million for 2025. This indicates impressive year-over-year growth of 4.3% and 7.93%, respectively.

Image Source: Zacks Investment Research

CLB’s operations are largely driven by international markets with around 80% of its revenues coming from outside the United States. In second-quarter 2024, the Reservoir Description segment’s revenues grew 3.5% year over year, reflecting rising demand for its services across international oilfields. The company's Middle Eastern operations are poised to benefit from increased face-to-face engagements with operators, reinforcing multi-year growth opportunities.
 

Innovation and Competitive Edge

Core Laboratories continues to innovate with advanced technologies like the Dual Energy Computed Tomography for reservoir description and its HERO-oriented FRAC technology in production enhancement. These offerings help clients optimize well productivity and recovery rates, providing CLB with a competitive edge in a technology-driven industry.

Commitment to Financial Discipline

CLB has demonstrated a strong commitment to financial discipline. The company generated substantial free cash flow and has been directing excess cash toward reducing debt. This strategy has resulted in a healthier balance sheet with a lower leverage ratio and expectations for continued FCF growth.
 

Asset-Light Business Model

The company’s asset-light approach enables it to generate high returns on invested capital (ROIC). Core's focus on maximizing free cash flow through disciplined capital spending has resulted in a ROIC of 8%. This business model positions CLB to maintain profitability even during periods of lower capital expenditure by clients.
 

Final Thoughts for CLB Stock

Given these positive trends, we believe this could be a great time to consider buying CLB stock. The company’s strong fundamentals, commitment to shareholder returns and competitive edge in technology suggest that it has plenty of room for growth. CLB is currently 20% lower than its 52-week high, presenting an attractive entry point for investors. If you’re looking to invest in the oilfield services industry, adding this Zacks Rank #2 (Buy) stock to your portfolio will be a smart move. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Core Laboratories Inc. (CLB) : Free Stock Analysis Report

Tetra Technologies, Inc. (TTI) : Free Stock Analysis Report

ProFrac Holding Corp. (ACDC) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research