Why Tesco Shares Dropped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil drilling-equipment manufacturer Tesco (NYSE: TESO  ) fell as much as 16% after a disappointing earnings report today.

So what: When adjusted for the gain on the sale of its CASING DRILLING business to Schlumberger (NYSE: SLB  ) , Tesco’s earnings were only about $0.13 per share, well below estimates of$0.34 per share. Revenues for the quarter also came in nearly 10% below the Wall Street consensus at $136.7 million. That was still a 16.5% increase over a year ago, but meeting expectations is almost always more important than growth in the eyes of Wall Street. Revenues were also down sequentially from Q1, and adjusted EBITDA declined 6% from a year ago.

Now what: The sale of CASING DRILLNG leaves Tesco with two major income streams -- top drives, and tubular services -- both of which grew steadily in the quarter. As a high-beta stock sitting near its 52-week low, Tesco could make a comeback if oil prices continue to rise, which would lift demand for its products. Keep an eye on energy prices in the near future to see if Tesco follows.

Want to stay filled in on Tesco? Add them to your watchlist by clicking right here.

Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Related Tickers

10/25/2016 4:00 PM
SLB $80.22 Down -0.09 -0.11%
Schlumberger CAPS Rating: ****