Why Tesco Shares Dropped
Aug 6th 2012 5:52PM
Updated Aug 6th 2012 5:56PM
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 drilling-equipment manufacturer Tesco (NYS: TESO) fell as much as 16% after a disappointing earnings report today.
So what: When adjusted for the gain on the sale of its CASING DRILLING business to Schlumberger (NYS: SLB) , Tesco's earnings were only about $0.13 per share, well below estimates of$0.34 per share. Revenues for the quarter also came in nearly 10% below the Wall Street consensus at $136.7 million. That was still a 16.5% increase over a year ago, but meeting expectations is almost always more important than growth in the eyes of Wall Street. Revenues were also down sequentially from Q1, and adjusted EBITDA declined 6% from a year ago.
Now what: The sale of CASING DRILLNG leaves Tesco with two major income streams -- top drives, and tubular services -- both of which grew steadily in the quarter. As a high-beta stock sitting near its 52-week low, Tesco could make a comeback if oil prices continue to rise, which would lift demand for its products. Keep an eye on energy prices in the near future to see if Tesco follows.
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The article Why Tesco Shares Dropped originally appeared on Fool.com.Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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