Transocean’s Performance: Analyzing the Recent Trends
Transocean’s Q4 Earnings: What Do Analysts Expect?
What does Transocean’s share price movement tell us?
On February 12, Transocean’s (RIG) share price was $8.86, down 52% in a year and close to its one-year low. Transocean’s share price reached its one-year high of ~$21.3 in mid-May 2015. Transocean’s top line and bottom line deteriorated quarter-over-quarter until fiscal 3Q15. The company first slashed its quarterly dividend by 80% to $0.15 per share in May 2015. In November, it canceled its fiscal 3Q15 and 4Q15 quarterly dividends. It also canceled its share repurchase program. Weak financial performance and a weak energy market have kept Transocean’s stock pressured throughout the year.
The Market Vectors Oil Services ETF (OIH), an ETF tracking an index of 25 oilfield service companies, has fallen 36% in the past year. Transocean is 3.1% of OIH. The US offshore rig count fell more than 52% in the past year. Drill-Quip (DRQ), Transocean’s oilfield service peer, has fallen 30% in the past year. Compared to Transocean’s $3.2 billion market capitalization, Drill-Quip’s market capitalization currently stands at $2.0 billion.
Analyzing factors that can affect Transocean’s performance
Transocean’s management expects offshore drilling contracts to remain challenging in 2016 and 2017. The excess capacity in the offshore drilling market could lower rig utilization and day rates, causing Transocean’s revenue and income to fall. However, Transocean has continued to invest in building deep-sea floaters like the Deepwater Thalassa, which should eventually add to its revenues. From October to December 2015, Transocean added one more contract while it lost two contracts on early terminations.
All these factors contribute to RIG’s share price performance. Read Market Realist’s article Why Transocean’s Long-Term Outlook Is Full of Uncertainty to learn about Transocean in depth.
Next, we’ll discuss Wall Street analysts’ targets for Transocean.
Browse this series on Market Realist:
