What happened

Shares of Flotek Industries (NYSE:FTK) are cratering today, down a whopping 36% as of 12:38 p.m. EDT, after the company reported earnings that missed expectations. 

So what

The chemicals specialist reported revenue of $85.2 million and a per-share loss of $0.07 in the second quarter. If we strip out losses for its discontinued operations, then Flotek's loss would have been $0.02 per share. Wall Street analysts were expecting $88.9 million in revenue and net income of $0.04 per share.

Drilling rig in mountainous terrain

Image source: Getty Images.

Even though Flotek did see higher revenue in the quarter, those gains were more than offset by higher costs, especially in its consumer and industrial technologies business. Also, considering the increased oil and gas drilling activity going on in the U.S. right now, it's probably likely that Wall Street was expecting greater revenue gains for its energy chemistry technologies segment.

The most positive note in this earnings report is that the company was able to sell its drilling technologies business in the second quarter. This segment -- which also represented Flotek's discontinued operations -- was sold at a loss but did net the company $17 million in cash that it used to pay down debt so that the company has no notes outstanding, and only borrowings under its revolving credit facility remain.

Now what

Flotek has been touting its Complex nano-Fluid as a game-changing chemical additive that increases internal rates of return for wells. While the company has seen some initial traction with some clients, it has yet to gain widespread adoption. This can be frustrating for investors when you consider that so many other oil services companies have been on the upswing lately

Flotek still has an uphill battle in front of it. Thankfully, it has sold off its unprofitable business segments recently to focus on its core products of chemicals and fluids. If management can find a way toward widespread adoption of its chemicals, then this could be an attractive stock. However, that is a big "if" statement right now, and it may be worth waiting on the sidelines until it all shakes out.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.