Why Shares of Diamond Offshore Drilling Inc Popped Today

Is this meaningful or just another movement?

Travis Hoium
Travis Hoium
Apr 24, 2014 at 4:26PM
Energy, Materials, and Utilities

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of oil driller Diamond Offshore Drilling Inc (NYSE:DO) jumped as much as 10.6% today after releasing earnings.

So what: first quarter revenue fell 3% to $709.4 million but came in ahead of the $686.3 million estimate from analysts. Net income also dropped 17% to $145.8 million but adjusted earnings per share of $0.93 easily topped the $0.65 estimate.  

Now what: Expectations for early 2014 are low across the industry but we're seeing high utilization and dayrates in jack-ups, which is helping results. The ultra-deepwater segment, which has driven the industry's growth recently, was slow and utilization was down to 66% last quarter. I think the numbers are good, and with a $0.75 special dividend on top of the $0.125 quarterly dividend, shares have room to run as the overall drilling market improves this year.