What happened

Tenaris SA's (NYSE:TS) stock rallied more than 10% by 2:45 p.m. EDT on Thursday after the steelmaker reported third-quarter results. While earnings came in a bit shy of expectations, its outlook suggests that even better days lie ahead.

So what

Tenaris pulled in $1.3 billion of revenue during the third quarter, which was up 31.7% from last year's third quarter and in line with analysts' expectations. The main fuel of that sales growth was strong demand for its oil-related steel products in the Americas, thanks to increased drilling activity in the U.S., Canada, and Argentina. That helped offset weaker sales in the Middle East and Africa. The sales growth, when combined with improving margins, drove a 41% year-over-year increase in earnings, which rose to $105 million, or $0.09 per share, though that was $0.01 per share less than analysts' expectations.

A stack of steel drill pipes

Image source: Getty Images.

Investors were able to overlook that slight earnings miss due to the strength of Tenaris' outlook. The company noted that it built up $216 million of inventory "in anticipation of higher shipments in the forthcoming quarter." Furthermore, the company stated that "in the fourth quarter and going into 2018, we expect our sales in the Americas to continue growing," as a result of stabilization in U.S. and Canadian energy markets, and greater drilling activity in Argentina's Vaca Muerta shale. Tenaris anticipates that "EBITDA and operating income should also grow," thanks to the expectation that margins will expand as it uses more capacity at its facilities and keeps a lid on costs.

Now what

Market conditions across the energy industry should be more stable in 2018: Producers are planning to be conservative with investment spending, so they don't flood the market with more oil. Those improving market trends would help Tenaris meet its outlook for growing sales and earnings, which could provide its stock with the momentum to keep going higher.

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