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Here’s Why RigNet Inc’s Stock Is Plunging Today

By Matthew DiLallo - Nov 7, 2017 at 3:30PM

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While the remote communications-solutions provider’s revenue grew, its loss was much wider than expected.

What happened

Shares of RigNet ( RNET ) slumped on Tuesday and were down more than 10% at 2:30 p.m. EST. Fueling the sell-off was its third-quarter report, which missed analysts' expectations by a mile.

So what

RigNet reported $50.8 million in revenue during the third quarter. This number was 0.5% above last year's third quarter, but was $0.5 million below the consensus estimate. Further, the company's net loss widened from $1.7 million, or $0.09 per share, in the year-ago period to $4.2 million, or $0.23 per share. That missed expectations by $0.14 per share.

An offshore oil platform at sunset.

Image source: Getty Images.

Several factors drove the lackluster results, including continued weakness in the offshore drilling market and additional costs from the company's efforts to diversify away from that segment. During the third quarter, for example, the company recorded $0.8 million in acquisition costs and another $0.8 million of restructuring charges as a result of recent acquisitions. Meanwhile, the company also did a poor job keeping a lid on costs, considering that selling and marketing, as well as general and administrative expenses, rose versus both the year-ago period and last quarter.

Now what

If there's any silver lining, it's that oil prices have improved sharply over the past few months, thanks to OPEC's efforts to drain the market's oversupply and the decision by shale drillers to tap the brakes. Because of that, oil companies are more comfortable giving the green light to offshore oil projects, with several expected to start up next year. That should provide more work for drilling rigs, which would eventually flow down to RigNet. However, a full-fledged recovery in the offshore drilling market appears to be at least a year away, so RigNet investors will likely face more volatility in the coming months.

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.

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