Weatherford Disappoints (Again) And That Makes The Stock Tough To Buy

Weatherford International (NYSE:WFT) shares plunged in November and traded for about $9 after the company announced disappointing financial results. Since then, the stock has been in a solid uptrend, and it recently traded for over $13. However, just days ago, the company announced financial results and the stock has been heading lower once again.

Weatherford's earnings report clearly seems to have disappointed some investors. For the fourth quarter of 2012, it reported a loss of $122 million, or 16 cents per share. In the same quarter last year, Weatherford posted a loss of $13 million or 2 cents per share. The higher losses last quarter were blamed on tax remediation efforts and other factors. The company also said it would work towards selling non-core assets in order to focus on key segments like well construction and production optimization.

Weatherford also said a recent 32% devaluation of the Venezuelan currency would cost the company about $60 million in the first quarter of 2013. Plus, it gave weaker-than-expected guidance. Analyst estimates were at 20 cents per share for the first quarter of 2013, but the company gave a range of just 16 to 18 cents.

This company also announced charges in the third quarter of 2012, which included inventory adjustments, professional fees, severance and other expenses. That's one reason why there always seems to be some "special" charge or issue that is disappointing to investors. There have been other disappointments in the past as well.

Weatherford has been dealing with everything from tax errors and earnings restatements, to government investigations of the company for work done in sanctioned countries, and for participation in the oil-for-food program, etc. All these issues have put a cloud of uncertainty over this stock for some investors and until the company can put these issues behind it and start delivering consistent earnings, this stock is likely to underperform. For myself and others, this has become a "show me" stock and unless management can start to produce more consistency, it is hard to get excited about this company.

Analysts expect Weatherford to earn about $1 per share in 2013. That puts the price-to-earnings ratio at about 12, which is similar to other companies in this sector. However, some other companies have been producing more consistent earnings and do not have ongoing tax accounting issues to contend with. Because of these issues and the weaker-than-expected guidance for Q1, this stock could continue to drift down and lag the market indexes and its peers. On February 27, the Dow Index surged by about 175 points and many oil-related stocks rallied, but Weatherford shares closed up by only 2 cents. That is a sign that this stock could be poised to be a laggard in the coming days and weeks. However, if it drifts back to the $9 to $10 range as it did about three months ago, I would consider buying the shares for the long-term potential it holds once the above mentioned issues are resolved.

One other risk factor investors should consider is Weatherford's debt-heavy balance sheet. This company has just around $300 million in cash and more than $7 billion in debt. That could significantly increase risks for investors and it is another reason why Weatherford may deserve to trade at a discount to its peers.

Key Data Points For Weatherford From Yahoo Finance:
Current Share Price: $11.95
52-Week Range: $8.84 to $17.75
Dividend: none
2013 Earnings Estimate: $1 per share
2014 Earnings Estimate: $1.54 per share

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.