Please ensure Javascript is enabled for purposes of website accessibility

RigNet Inc.'s Stock Sinks After Revealing a Contract Dispute

By Matthew DiLallo - Mar 1, 2016 at 11:40AM

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

The market doesn’t like that the provider of remote communications solutions is having trouble with a customer.


Image source: RigNet.

What: Shares of RigNet (RNET) slumped more than 15% by 10:45 a.m. ET on Tuesday after the company's fourth-quarter results yesterday revealed some troubling developments.

So what: RigNet's results were weighed down by the oil market downturn as well as a dispute the company is having with a customer. That caused it to post two sets of financial results for the quarter that weren't all that great.

For the quarter, revenue came in at $61.8 million without the contract dispute and $52.2 million including it. Both numbers are down substantially over the prior year, with the adjusted revenue number down 28.7% while the non-adjusted number was down 39.8%.

Meanwhile, quarterly cash earnings were even weaker when taking the contract dispute into account. That's because while the conflict resulted in a $9.6 million negative impact to revenue, its impact to earnings was even greater at $15.6 million. This is due to it taking into account not only the revenue impact but project cost and accruals of $6 million as well. The net result was a more than 95% year-over-year drop in earnings. Having said that, without the dispute, earnings would have increased by 15.7% due to the company's ability to control its costs.

Now what: RigNet is having a tough time right now. Not only is its core business being affected by the slowdown in the offshore drilling sector that's showing no signs of improving, but now it has to deal with friction with a key customer. Given that investors hate uncertainty, the contract dispute is only adding to an already uncertain situation at RigNet.

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

RigNet, Inc. Stock Quote
RigNet, Inc.

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

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.