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Geospace Technologies cut to Sell at BWS Financial, shares -5.8%

  • Geospace Technologies (GEOS -5.8%) is downgraded to Sell from Hold at BWS Financial.
  • GEOS' growth in the past year mostly has been the result of a one-time contract from Statoil, which will be fulfilled in H1 2014; the firm worries that the timing of the STO contract, a shrinking U.S. capex budget, a slow Canadian winter, a competitive pricing environment, and no timing as to a recovery in the U.S. exploration market could lead to a disappointing 2014.
Comments (3)
  • User 16067942
    , contributor
    Comment (1) | Send Message
     
    It sounds like they think the sky is falling, could it be that a Canadian winter happens around this time each year, and their guru's can't time the market because geos doesn't follow cycles of the moon or consumer shopping seasons. Maybe they just want to drive it down to purchase more shares of a company that has great profits, no debt and good management. Or they have to print something just to keep their job.
    Rick
    6 Jan, 03:49 PM Reply Like
  • James Hanshaw
    , contributor
    Comments (1214) | Send Message
     
    Probably all of those things, Rick. I shall stay long GEOS but they do have a point about the Statoil contract. It is large and completes this year. I stay long because they must have other stuff in the pipeline otherwise they would not be expanding their production capabilities.
    7 Jan, 12:54 PM Reply Like
  • seekingthetrooth
    , contributor
    Comments (548) | Send Message
     
    I'm skeptical about GEOS increasing earnings significantly in the coming few years to justify share price of 110 or so. To me it appears that earnings growth will be modest at best. I suspect they've hit a peak. Forget about the stock doubling in the next few years.

     

    No doubt their product differentiation and industry positioning is good but one should be mindful that seismic equipment & borehole markets are a national play around the world. China has its own operators who have local seismic providers. Russia also has its own. Product superiority or not, E&P is a national issue that generally favors local contractors to keep the local businesses thriving.

     

    This is compounded by the fact that there's no predictability in demand for both the wireless and PRM market. Technology adoption, trade-offs in acquisition of land blocks and/or enhancing recovery rates, geo-political situation and global demand all shape up matters.

     

    GEOS is fully priced and the only thing I can think of is a shareholder vote to put up the company for sale.
    8 Jan, 12:59 AM Reply Like
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