Why Core Laboratories shares rose 5% and fell 5% on the same day
Shares of an energy service company Basic laboratories (NYSE: CLB) opened the day with a gain of 5% from the previous close. They then quickly dropped to a drop of around 5%. Shortly after 11 a.m. EST, however, the title had reversed course and was back in the dark. But it fell again after that and was showing a decline of around 2.5% by 1pm. The culprit for these sharp swings was the company’s profits, with a little help from energy prices.
First the good news, analysts expected Core Laboratories to report fourth quarter 2020 earnings of $ 0.16 per share, but the company gained $ 0.18, removing one-off items. So it was a good pace, but it took a bit of digging to understand this number because the company first underlined its GAAP earnings of $ 0.31 per share. (On page 12 of the 13-page version, he provided a breakdown of the two numbers, outlining the one-off items that needed to be removed.)
In the dots at the top of the release, he also noted that the sequential increase in adjusted profit was more than 10% from the third quarter of 2020, but said nothing about the year-on-year change over the year. other, the ratio turned out to have been a drop of about 50%. Weak demand from exploration and production companies in the face of low oil prices clearly remains a persistent problem even though the company has done better than analysts expected.
So when you step back, fourth quarter earnings were pretty mixed. It’s pretty clear that Core Labs still faces the notable headwinds facing the energy sector today (especially the weakness of demand in the face of the pandemic). But, given the sequential improvement, its business appears to be improving as the world continues to adjust to the coronavirus.
The volatile price performance today is likely the result of investors with a half-full glass attitude here, while a half-empty glass type would likely focus on the ongoing negatives. In addition to the company’s actual financial results, oil prices were moving between positive and negative territory. This probably helped push the stock price up and down.
To be fair, Core Labs seems to be doing reasonably well in the downturn in the energy industry, all things considered. Meanwhile, its continued focus on reducing debt and improving margins makes perfect sense. Management also appeared optimistic for 2021, as they expect what appears to be a slow recovery in the industry to continue through the year.
Nonetheless, this stock is not a good option for conservative investors as significant headwinds persist and stocks are quite volatile. Today is just one of many examples of this happening over the past year. But for more aggressive types with a constructive view of the oil and gas industry, it might be worth digging a little deeper here.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.