Headquartered in Houston, TX, Global Geophysical Services (GGS) is a provider of seismic data solutions for exploration and production companies worldwide.
Declining estimates sent GGS to a Zacks Rank # 5 (Strong Sell) on November 7, 2013.
Disappointing Third Quarter Results
On November 5, 2012, GGS reported its third quarter results. The company reported revenues of $70.0 million, Cash EBITDA of $10.2 million and an adjusted net loss of $0.32 per share. The loss was substantially worse than the Zacks Consensus Estimate of a loss $0.10 per share.
Following disappointing results, analysts have cut their estimates for GGS. Zacks Consensus Estimates for the current year and the next year are currently ($0.60) per share and ($0.67) per share, down from ($0.09) per share and ($0.40) per share respectively, 60 days ago.
The following “Price & Consensus” chart illustrates declining estimates trend for the stock:
High Leverage/Liquidity Concerns
In December, GGS issued $8.0 million of preferred perpetual stock at 11.5% interest rate. The rate of interest suggests that investors see this company as a very high risk play.
Further, the company already has a very high debt load. At the end of third quarter, net debt was $327 million. The company’s interest burden was $8.9 million during last quarter.
While the management has been emphasizing on their focus on reducing the debt, no progress has been made so far. The company had breakeven cash flow over the first three quarters of 2013. GGS’s Liquidity and the ability to generate free cash flows remains a concern as they leave it vulnerable to any downturn in business or economic conditions.
Some of the recent steps by the company towards altering the revenue mix and modifying the cost structure may deliver results in the long-term but near-term issues may keep the stock under pressure for the time being.
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