A temporary building under a blue sky.

Temporary buildings aren't in the demand they used to be. Image source: Getty Images.

What happened 

Shares of workforce accommodation company Civeo Corporation (NYSE:CVEO) fell as much as 15.8% in trading Friday after releasing preliminary results. At 12:30 p.m. EST shares had recovered slightly but were still down 9.1% on the day.

So what

Management released a statement touting the rise in oil and metallurgical coal prices as tailwinds that will help the business long term. But it also gave preliminary Q4 2016 results and guidance for 2017, which did little to give investors the impression that conditions are going to get better quickly.

Fourth-quarter revenue is expected to be between $89 million and $92 million with EBITDA of $16 million to $18 million, which is in line with expectations. But 2017 guidance is for revenue of $337 million to $353 million and EBITDA of $60 million to $65 million. It doesn't take much effort to see that the average quarterly result expected in 2017 will actually be worse than the fourth quarter, which isn't a good trend at all. On top of that, guidance fell well short of the $397.3 million in revenue analysts were expecting.

Now what

Commodity prices may be on the rise, but energy companies aren't currently in need of more site accommodation and facilities from companies like Civeo Corporation. If there isn't an improvement in demand soon, the company will continue to bleed red ink. Given the fact that demand isn't returning to the workforce accommodation business as commodity prices are rising, there seems to be something fundamentally wrong with the business and I wouldn't buy the dip in shares.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.