Shares of energy services company Core Laboratories (CLB 1.61%) opened the day with a 5% gain from the previous close. They then promptly fell to a decline of roughly 5%. By a little after 11 a.m. EST, however, the stock had reversed course and was back in the black. But it dipped lower again after that and was sitting with a decline of around 2.5% at 1 p.m. The culprit behind these wide swings was the company's earnings, with a little help from energy prices mixed in.
First the good news, analysts had been expecting Core Laboratories to report earnings of $0.16 per share in the fourth quarter of 2020, but the company earned $0.18, taking out one-time items. So that was a nice beat, but you had to dig a little to understand that number because the company first highlighted its GAAP earnings of $0.31 per share. (On page 12 of the 13-page release, it provided a breakdown of the two numbers, outlining one-time items that needed to be pulled out.)
In the bullet points at the top of the release, meanwhile, it also noted that the sequential increase in adjusted earnings was more than 10% over the third quarter of 2020, but said nothing about the year-over-year change, which deeper in the report was shown to have been a decline of roughly 50%. Weak demand from exploration and production companies in the face of low oil prices clearly remains an ongoing problem even though the company did better than analysts had hoped.
So when you step back, fourth-quarter earnings were something of a mixed bag. It's pretty clear that Core Labs is still dealing with the notable headwinds facing the energy sector today (notably, weak demand in the face of the pandemic). But, given the sequential improvement, its business appears to be turning for the better as the world continues to adjust to the coronavirus.
The volatile price performance today is probably a result of the fact that investors with a glass-half-full attitude would see positives here, while a glass-half-empty type would likely focus on the ongoing negatives. On top of the company's actual financial results, oil prices were moving between positive and negative territory. That likely helped to push the stock price up and down as well.
To be fair, Core Labs seems to be muddling through the energy industry downturn reasonably well, all things considered. Meanwhile, its ongoing focus on debt reduction and margin improvement makes a lot of sense. Management also sounded optimistic about 2021, as it expects what appears to be a slow industry recovery to continue as the year progresses.
Still, this stock is not a good option for conservative investors because material headwinds remain and the shares are pretty volatile. Today is just one of many examples of that fact over the past year. But for more-aggressive types with a constructive view of the oil and natural gas industry, it might be worth the time to dig in a little deeper here.