Shares of oil services provider Transocean (RIG 7.34%) were higher by an impressive 30% at one point in the first 60 minutes of the trading day on Nov. 3. But by 10:30 a.m. EST the stock had given up roughly half that gain and was sitting on an advance of 16% or so. The big story was the company's after-market earnings release on Nov. 2.
The big takeaway from the quarter is really that the company's results were mixed. For example, the adjusted loss of $0.11 per share was much better than the $0.38 per share loss in the third quarter of 2019. The company also beat Wall Street expectations of a loss of $0.17 per share. Investors usually look favorably on companies that beat analyst estimates.
However, the company's results show that the energy sector is still facing material headwinds and that is leading to less spending on the part of Transocean's customers. Sales, for example, were lower year over year. And losing money is usually not good news even if the loss is less bad than Wall Street was expecting. That said, the company has been working hard to keep costs in check and it has a roughly $8.2 billion backlog of work waiting to be completed. So, despite low oil prices and the impact that has on the company and the oil and gas industry it serves, Transocean appears to be reasonably well situated to muddle through this ongoing rough patch. All in, it's not surprising that investors were upbeat here, even though the initial excitement was likely overdone.
It's worth noting that oil prices were rallying in early trading today, which always helps to brighten the mood of investors when it comes to energy-related names like Transocean. The company's headline number, meanwhile, was a profit of $0.51 per share, but that included one-time gains so the adjusted figure noted above is the better number. Clearly, there was more at play here than meets the eye. But, when you sort through the numbers, it is clear that Transocean is roughing it through a bad period and right now, at least, there are still material headwinds to deal with. The only thing you can go in expecting here is more stock price volatility in the days ahead.