Estimates have come down substantially after ugly second quarter results, sending Mitcham Industries (MIND) to a Zacks Rank No. 5 (Strong Sell) earlier this month.
About the Company
Mitcham Industries specializes in leasing and sale of advanced seismic equipment that help oil companies explore for pockets of oil. The company operates in two segments: equipment leasing and equipment manufacturing. Founded in 1987, the company now has nine locations around the world, providing support and service to geophysical contractors.
Disappointing Second-Quarter Results
MIND reported its fiscal 2014 second quarter ended July 31, 2013, financial results on Sept. 4, 2013. Total revenues for the quarter were $20.9 million down from $23.1 million in the year-ago quarter. The company reported a net loss of $693,000, or $(0.05) per share, compared to net income of $1.1 million, or $0.08 per diluted share, in the comparable quarter of fiscal 2013.
Apart from seasonal softness in leasing, continued weakness in U.S. land activity; project delays due to permitting difficulties, labor unrest and security issues in Colombia; and a recent decline in marine leasing activity were the major contributors to lower leasing revenues. Management said that in the next quarter, it would be difficult for them to match leasing revenues a year ago, given the softness and delays in Latin America.
Due to disappointing results and uninspiring guidance, quarterly and annual estimates have been revised sharply downward in the past few weeks. Zacks consensus estimates for the current quarter and year are now $(0.01) and $0.69, respectively, down from $0.27 and $1.37 per share 60 days ago.
The Bottom Line
While the company has growth potential in the much longer term given a positive outlook for the oil and gas exploration industry, near-term headwinds will keep the stock under pressure. MIND is currently a Zacks Rank No. 5 (Strong Sell) stock and it has a recommendation of "Underperform." Furthermore, aZacks Industry Rank of 205 out of 265 also indicates some weakness in the short to mid-term. As such, investors would like to avoid this stock for the time being.
Investors seeking exposure to the industry could look Dril-Quip (DRQ), a Zacks Rank No. 1 stock with an "Outperform" recommendation.
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