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Huge Earnings Miss Sends Helix Energy Solutions Group Inc's Stock Down 17%

By Matthew DiLallo – Jul 21, 2015 at 1:45PM

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Oil market downturn causes Helix Energy Solutions Group Inc to miss analysts’ estimates on both the top and bottom lines.

What: Helix Energy Solutions Group Inc (HLX 1.03%) reported much weaker than expected second-quarter results after the market closed yesterday. That poor showing fueled a deep sell-off on Tuesday, with the stock down more than 17% as of this writing. That said, volatility is the norm when Helix reports quarterly results, as the company's stock price made double-digit moves the last two times it reported.

So what: For the quarter, Helix reported revenue of $166 million, which was not only down 45.7% year over year, but missed analysts estimates by $27.7 million. The company didn't only miss big on revenue -- it was way off from analysts' earnings estimates, turning in a loss of $0.03 per share, when analysts were expecting a profit of $0.15 per share. Investors don't like big misses, and are showing their displeasure by selling off the stock.

Helix blamed the weak oil market for its poor showing. The company noted that its well intervention business was negatively affected by a longer-than-planned Q4000 regulatory dry-dock, while it also experienced customer delays on the H534. In addition, the company's sales, general, and administrative expenses spiked to 10% of revenue, which was up from just 6.7% last quarter. This was partially due to an extra $2.5 million in charges associated with what now looks to be an uncollectable receivable. Meanwhile, interest expenses nearly doubled as the company took delivery of the Q5000 using proceeds from a term loan to fund the final payment to the shipyard. Suffice it to say that what could go wrong did go wrong. 

Now what: Helix Energy Solutions endured a rough quarter, as two of its key vessels were out of work longer than expected. To make matters worse, the company also had higher expenses -- the downturn in the energy market is impacting its customers, leading to uncertainty regarding collection of a big receivable.

That said, the company is working to reduce its costs and has substantial liquidity, which puts it in a position to weather the downturn better than many of its competitors.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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