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Bear of the Day

The oil and gas industry has been very volatile over the past few quarters, and businesses that provide services for these producers have been under increased stress as of late.   Oil and gas producers have been cutting drilling operations, and their need for many specific services.  This has put enormous stress on service companies like the Bristow Group (BRS - Snapshot Report) , who is the Zacks Bear of the Day.

This Zacks Rank #5 (Strong Sell) is a leading provider of helicopter services to the worldwide energy industry. Through its subsidiaries, affiliates and joint ventures, the Company has major transportation operations in the U.S. Gulf of Mexico and the North Sea, and in most of the other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, Mexico, Nigeria, Russia and Trinidad. Additionally, the Company is a leading provider of production management services for oil and gas production facilities in the U.S. Gulf of Mexico.

Recent Earnings Results

Management announced Q1 17 results in the beginning of August, and they missed both the Zacks Consensus Earnings and Revenue estimates by a wide margin.  The company saw year over year declines in operating revenues -19.1%, diluted loss per share -333.3%, adjusted EBITDAR -41.9%, adjusted net income -160.8%, adjusted earnings per share -160.7%, and operating cash flow -196.6%.

Management’s Take

According to Jonathan Baliff, President and CEO, “Our first quarter financial results continued to be severely impacted by the unprecedented challenges the oil and gas industry has been facing since 2014, which intensified in the first quarter of fiscal 2017, as reflected in reduced activity, lower revenue and margins and foreign exchange volatility. We remain laser focused on Target Zero safety, right sizing our cost structure, and deferring capital expenditures to improve our business in fiscal 2017 and fiscal 2018."

"In this environment, physical and financial safety remain our top priorities, and Bristow demonstrated real progress thus far in fiscal 2017. We are aggressively pursuing additional initiatives to improve our liquidity position as we successfully manage through this downturn with the completion of U.K. SAR contract start-up activities, additional reduction in capital expenditures, further cost reductions and expected outcome of negotiations with our key business partners.”

Price and Consensus Estimates Graph

As you can see from the graph below, the stock price and future earnings estimates have been falling since 2014.

BRISTOW GROUP Price and Consensus

BRISTOW GROUP Price and Consensus | BRISTOW GROUP Quote

Declining Estimates

Over the past 7 days, estimates for Q2 17, Q3 17, FY 17 and FY 18 have all seen negative earnings adjustments; Q2 17 fell from -$0.02 to -$0.23, Q3 17 dropped from $0.03 to -$0.18, FY 17 plummeted from -$0.21 to -$1.86, and FY 18 crashed from -$0.06 to -$0.59.

Bottom Line

The Bristow Group is seeing a continuous decline in rig counts, and increased pressure from FOREX headwinds.   Unfortunately for Bristow, these issues are not going away anytime soon.  Therefore you would be best served by waiting on the sideline for the near to mid-term.

If you are inclined to invest in the Transportation/Airline segment, you should look into Copa Holdings (CPA - Snapshot Report) who currently carries a Zacks Rank #1 (Strong Buy), and or SkyWest Inc. (SKYW - Snapshot Report) who is currently holding a Zacks Rank #2 (Buy).

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