Shares of Oceaneering International (OII 5.86%), a provider of energy services largely in the offshore drilling arena, fell sharply in early trading on April 28, dropping as much as 12%. The big news was the company's first-quarter 2021 earnings release, which hit the market after the close on April 27.
On the revenue front, Oceaneering International reported sales of $446 million, up from $438 million in the first quarter of 2021, but down from the $467 million it brought in during the fourth quarter of 2021. That, however, wasn't a shock: CEO Roderick Larson noted, "Our consolidated first quarter 2022 unfolded largely as expected." And, looking to the rest of the year, management is anticipating a notable uptick in the business. Revenues, meanwhile, came in above analyst consensus.
On the bottom line, Oceaneering International reported an adjusted per-share loss of $0.06. That was down from an adjusted profit of $0.03 per share in the first quarter of 2021 and adjusted earnings per share of $0.05 in the fourth quarter of 2021. That trend is less than ideal, but the adjusted $0.06-per-share loss this quarter still managed to beat Wall Street's expectation of a $0.10-per-share loss. Normally beating on the top and bottom lines generates enthusiasm from investors, but that clearly didn't take place today given the stock drop. There could be a couple of reasons for this, including the company highlighting inflationary cost increases that it is facing and cost overruns at one of its projects. According to the CEO, the company expects to see "a significant activity increase" for the rest of 2022, but it appears that investors are taking a "show me" approach here just the same.
The energy sector is notoriously volatile, with the energy services segment generally experiencing even more volatility. So today's drop really isn't all that shocking in and of itself. What's notable is that Oceaneering International beat the Street's top- and bottom-line calls and still fell (on a day when oil prices were up). That suggests investors are worried that the trends that dragged down the first quarter could be more material than they seem. Rising costs are certainly one notable worry on that score, as they could very realistically lead to more cost overruns as the year progresses.