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Bear of the Day: Mitcham (MIND)

Neena Mishra

Estimates have come down substantially after weak fourth quarter results, sending Mitcham to a Zacks Rank # 5 (Strong Sell) last week.
About the Company

Mitcham Industries (MIND) specializes in leasing and sale of advanced seismic equipment that help oil companies explore for pockets of oil.
The company operates in two main business segments: equipment leasing and equipment manufacturing. During fiscal year ended January 1, 2013, leasing accounted for 52% of revenues; manufacturing 30% and 18% of revenues came from other equipment sales.
Founded in 1987, the company now has nine locations around the world, providing support and service to geophysical contractors.
Disappointing Fourth Quarter Results
MIND reported its fiscal 2014 fourth quarter ended January 31, 2013 financial results on April 2, 2014. Total revenues for the quarter were 
$23.6 million  down from $28.4 million in the same quarter last year.
Net income was 
also down and was at $1.8 million, or  $0.14  per share, compared to  $3.4 million , or  $0.26  per share, in the prior-year quarter. 
On the positive side, core leasing revenues were up about 6% from Q1 of 2013, thanks mainly to improved activity in Latin America, Europe, Russia and the US. However, Canada leasing revenues suffered due to significant decline in the seismic exploration. Sales of lease pool equipment and Other equipment were also down.
The management believes that their fiscal 2015 results will show some improvement over fiscal 2014 but that improvement will likely not be seen until after the first quarter of this year.
Downwards Revisions
Due to weak results and uninspiring guidance, quarterly and annual estimates have been revised downwards in the past few weeks. Zacks consensus estimates for the current quarter and year are now $0.45 per share and $0.85 per share respectively down from $0.52 per share and $1.10 per share, 30 days ago.
The following chart shows the trend of declining estimates for MIND:

Negative estimates revisions send MIND back to Zacks Rank # 5 (Strong Sell) last week. The stock was earlier featured as the “Bear of the Day” on September 25, 2013 and it is down 6.4% since then.
The Bottom Line
While the company has growth potential in much longer-term given positive longer-term outlook for the oil & gas exploration industry, near-term headwinds will keep the stock under pressure.
MIND is currently Zacks Rank # 5 (Strong Sell) stock.  Further, Zacks Industry Rank of 200 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.
Better Play?
Oil machinery and equipment industry is currently ranked 200 out of 265 industries (Bottom 25%) by Zacks. There is currently one stock—Matrix Service (MTRX)—that has a Zacks Rank of 1 (Strong Buy).  A solid earnings beat (46%) and raised outlook sent this stock to its 52 week high recently.
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