Accustomed to operating in harsh environs, oil services company OceaneeringInternational (NYSE:OII) offered a harsh dose of reality to its shareholders this morning -- and received some harsh treatment in return. On a decent morning for the markets, the stock was the largest percentage loser on the New York Stock Exchange.

The culprit? After the close yesterday, Oceaneering announced that its acquisition of Subsea 7's (what a name!) remotely operated vehicle (ROV) drill rig support business failed because "conditions of closing have not been met." Vague as that sounds, Oceaneering will nonetheless write off up to $1.8 million in pre-tax expenses related to the transaction.

Likely what upset the market was that Oceaneering trimmed its earnings guidance a nickel to $1.55 to $1.65 a share. To put that another way, it lowered its guidance by $1.2 million, and investors lowered the company's market capitalization by $105.7 million (an unlucky 13%). Talk about harsh!

Investors should take a second look. At the low end of guidance, the stock sells for 19 times forward earnings, a multiple that might make sense for a company not expecting to grow earnings by 20% in 2005 -- before any accretive effects of acquisitions. That's right, accretive acquisitions. For example, the recently acquired ROV operations of Stolt Offshore (NASDAQ:SOSA) are expected to add up to $2.3 million to 2004 net income.

Moreover, acquisitions can have an outsized impact on Oceaneering's per-share earnings because there are a modest 24.3 million shares outstanding. Debt, at 34% of capital, is also reasonable. Add in that the stock trades at a relatively modest 8.4 times cash flow, and you have to wonder about the severity of today's sell-off.

For perspective, competitors Stolt and Global Industries (NASDAQ:GLBL) recently reported losses. Cal Dive (NASDAQ:CDIS) -- besides sporting a poor name for a West Coast eatery -- offers better margins and is less diversified, but it trades for a premium 30 times earnings. Bigger competitors Halliburton (NYSE:HAL) and Technip (NYSE:TKP) are much more oriented toward construction, have significantly lower margins, and are burdened by debt-to-capital ratios twice as high.

It's been a rough day for Oceaneering and its investors. Looking at the numbers and considering the competition, you have to wonder if the stock's treatment wasn't a little over the top.

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Fool contributor W.D. Crotty follows oil and oil-related businesses -- and can still smell the aroma of the oil refinery where he worked during college. Pew! He likes the aroma of a cattle feedlot, too! W.D. does not own stock in any companies mentioned.