Shares of oil shipper Teekay Tankers (NYSE:TNK) dropped more than 11% in early trading Thursday and remained down 9.6% as of 2 p.m. EDT. More than just a reaction to tumbling oil prices (which are taking down oil company stocks left and right), today's bad news for Teekay appears to focus more on the company, which just reported earnings.
For fiscal Q1 2019, Teekay reported this morning, it earned $0.05 per share (versus an $0.08 loss a year ago) on sales of $232.5 million -- much better than the $139.8 million that Wall Street was looking for.
So what's wrong with that? Turning a loss into a profit, and producing sales nearly $100 million more than expected, has to be a good thing, right?
Not necessarily. Although Teekay did earn more revenue than expected, its $0.05 per share profit turns out to be about a penny below estimates, which called for EPS of $0.06. CEO Kevin Mackay noted that while "average crude-tanker spot rates moderately increased during the first quarter of 2019, which resulted in another profitable quarter and slightly improved results over the prior quarter ... spot rates declined toward the latter half of the first quarter, and the market faces a number of seasonal and other short-term headwinds, which are expected to reduce our earnings during the second quarter of 2019."
Translation: Teekay's profits improved markedly in Q1, albeit they weren't quite as strong as anticipated. And one reason for the earnings miss is that tanker charter rates are now turning around and going down -- which is why Teekay now predicts weaker profits in Q2 2019.
Teekay didn't say exactly how bad it expects Q2 to be. And Mackay did say that he expects things to improve in the second half of the fiscal year based on "an expected increase in U.S. crude oil exports, higher OPEC production, lower tanker fleet growth," as well as the positive effects of new international rules aimed as reducing air pollution from tankers.
Given the negative sentiment pervading oil markets today, however, investors appear inclined to shoot first and ask questions (about lower spot rates) later. Teekay stock is going down as a result.