Please ensure Javascript is enabled for purposes of website accessibility

Core Laboratories' Stock Climbed 10% After Investors Realized Earnings Weren't That Bad

By Tyler Crowe – Feb 1, 2016 at 9:55AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of Core Laboratories slid after posting results last week, but investors warmed back up by the next day.

What: Shares of Core Laboratories (CLB -5.00%) climbed more than 10% by market close on Friday. While there was no news on the day, the company's earnings posted the day before had shown that it's still profitable.

So what: As more companies report earnings, we're starting to get a clearer picture of what 2016 will look like for the energy industry. According to CEO David Demshur, the upcoming couple of quarters will remain rough for producers and services companies, but we should start to see a recovery in the second half of the year as lack of investment will lead to even faster decline rates at existing fields. This suggests that there is light at the end of the tunnel when it comes to oil prices, and if that's the case, then investors may be interested in Core Labs' stock again.

What's also a possible reason that investors are getting back into this stock is that the company's earnings were nothing to scoff at. Despite declining revenue and earnings, it is still converting every dollar of revenue to $0.24 of free cash flow, which it's using to pay shareholders a dividend as well as continue to buy back shares. If the company can do this while the market is so rough, then that should give investors some confidence about its resiliency.

Now what: Let's also keep this most recent climb in perspective. The 10% spike on Friday is only a small blip in the close to two-year decline in Core Labs' share price, so investors certainly shouldn't feel like they have missed out when looking at this jump.

CLB Chart

CLB data by YCharts.

The longer-term focus for Core's investors now is to see whether the company is still able to churn out free cash flow at a high rate of revenue as the downturn persists. They should also keep an eye on the horizon for an eventual pickup in oil prices and drilling activity.

Tyler Crowe owns shares of Core Laboratories. You can follow him at Fool.com or on Twitter, @TylerCroweFool.

The Motley Fool owns shares of and recommends Core Laboratories. Try any of our Foolish newsletter services free for 30 days. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Core Laboratories N.V. Stock Quote
Core Laboratories N.V.
CLB
$13.48 (-5.00%) $0.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.