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Here's Why You Should Sell Oceaneering (OII) Stock Right Now

Zacks Equity Research

Oceaneering International, Inc. OII has lost 42.7% in the past year compared with the industry’s 17.7% decline. Moreover, the stock — currently carrying a Zacks Rank #4 (Sell) — has been witnessing downward earnings estimate revisions by most analysts.

Downward Estimate Revisions

The Zacks Consensus Estimate for the company’s bottom line for 2019 has been revised downward to a loss of 81 cents from a loss of 64 cents in the past 60 days. Notably, five analysts have made downward revisions during this time period.

The offshore equipment and technology solutions’ supplier has also been witnessing downward earnings estimate revisions for third-quarter 2019 by analysts over the same time frame.

Here we take a peek at the major issues plaguing Oceaneering.

Factors Affecting the Stock:

Tough market conditions for offshore drilling amid reduced spending and delays in awards, along with the closure of many projects are affecting Oceaneering’s business. Muted demand for offshore services and lack of investment in subsea greenfield projects are likely to keep the company’s profits under pressure. These factors affected its second-quarter 2019 results as well. Meanwhile, timing issues with the commercial theme park business also hampered second-quarter results. During the quarter, the company reported adjusted loss per share of 32 cents, wider than year-ago period’s loss of 23 cents per share.

Notably, the offshore drilling market is expected to remain sluggish throughout 2019. As such, the offshore market scenario is likely to remain challenging, thanks to reduced day rates, diminishing backlogs and volatility in the commodity price environment.

Revenues and operating income from Oceaneering’s Advanced Technologies unit, which primarily serves non-energy markets, declined in the last reported quarter. The segment — heavily dependent on government revenues (75%) — missed out on a large contract from the U.S. Navy, its biggest contractor. For second-half 2019, the company expects only modest growth in its government-related units. Although the company expects commercial businesses to improve in the second half of the year, it represents a small portion (25%) of the segment. 

Markedly, Oceaneering narrowed its view for full-year EBITDA, which is now projected within $150-$170 million versus the earlier guided range of $150-$180 million.

Stocks to Consider

Some better-ranked players in the energy space are National Oilwell Varco, Inc. NOV, Dril-Quip, Inc. DRQ and NuStar Energy L.P. NS. All these firms have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 137.5% year over year.

Dril-Quip’s 2019 earnings per share are expected to rise 131.8% year over year.

NuStar Energy’s third-quarter 2019 earnings per share are expected to gain more than 108% year over year.

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