A Closer Look at Weatherford International Ltd (WFT)’s Choppy Quarter

Weatherford International Ltd (NYSE:WFT) investors have endured quite the storm over the past year. While the company is not completely in the clear, it does appear that bluer skies are ahead. That’s why the company’s second-quarter earnings need to be seen with eyes toward the future. With that in mind, let’s take a closer look at the results

Breaking down the numbers
Weatherford International Ltd (NYSE:WFT) was able to meet analyst’s modest earnings expectations of $0.15 per share and revenue of $3.86 billion. Weatherford’s diversity really helped it in the quarter. Its North American revenue was down 8% over last year as the seasonal slowdown in Canada was compounded by flooding this past spring. The bright spot was its international business which saw a 12% jump in revenue from last year.

The real highlight for the quarter was its Middle East, North Africa, and Asia Pacific units which saw its revenue skyrocket 42% over last year. Asia Pacific was especially strong as the company generated its highest revenue and operating income there in its history.

In addition to weakness in Canada, Weatherford International Ltd (NYSE:WFT) had some of the same troubles as Baker Hughes Incorporated (NYSE:BHI) did in Latin America. Weatherford’s business in the region was down 6% over last year mainly due to lower activity in Mexico. That shouldn’t surprise investors, as that was one of the same areas Baker Hughes pointed out as being a trouble spot for it last quarter.

Storm clouds abating?
Weatherford International Ltd (NYSE:WFT) did have a lot of additional one-time items as it’s still trying to put its past missteps behind it. Among the charges was $153 million which represents management’s best estimates of the potential settlement with the U.S. government to settle the FCPA and oil-for-food matters. It should be noted that this is just management’s best guess at the moment, so more funds could be required to finally settle that issue. In addition to that, the company took several other charges relating to severance payments, legacy lump-sum contracts in Iraq and other fees. In total, the company took $234 million in charges, however, that’s well below last year’s $793 million in charges. Final resolution of these issues will really help the company move forward.