Bristow Group Inc. (BRS) is trying to manage its way through the energy downturn. This Zacks Rank #5 (Strong Sell) recently lowered fiscal 2016 guidance as it sees the weakness in the industry continuing another 6 months.
Bristow Group provides helicopter services to the offshore energy industry worldwide.
It has major transportation operations in the North Sea, Nigeria and the U.S. Gulf of Mexico and in most of the other major offshore oil and gas producing regions of the world including Australia, Canada, Russia and Trinidad.
Another Miss in the Second Quarter
On Nov 5, Bristow reported its fiscal second quarter 2016 results and missed for the fifth quarter in a row.
This quarter, it was an especially large miss. Earnings were just $0.04 compared to the estimate which was calling for $0.58.
It was hurt by the strong US dollar, as a substantial portion of its Europe Caspian region revenues is in British pounds and Norwegian kroner, both of which weakened significantly against the U.S. dollar since the year ago quarter.
The slowdown in the energy industry, obviously, also hit hard.
The company deferred $100 million in capital expenditures out of fiscal 2016. It also announced a new 2-year $200 million term loan to provide liquidity as it weathers the downturn.
“We expect results for the remainder of fiscal 2016 to continue to be impacted by the industry conditions affecting our clients,” said Jonathan Baliff, President and CEO of Bristow Group.
“However, we also expect second half operating results to be better than first half as the benefits of our cost reduction initiatives and diversification strategy into SAR and fixed wing logistics take full effect,” he added.
Fiscal 2016 Guidance Cut
Given the big miss and the tough market conditions, it’s not surprising that Bristow lowered its fiscal 2016 earnings guidance to a range of $1.80 to $2.40 from its previous guidance of $3.10 to $3.75.
This is the longest crude down turn in the last 35 years. Even the companies are having a difficult time figuring out when it will hit bottom.
Bristow is taking further steps to strengthen its balance sheet to ride out the storm.
So far, the dividend is still being paid. It is yielding 4.9%.
Estimates Fall
Not surprising, the analysts cut full year 2016 estimates after Bristow cut its guidance.
Bristow made $3.77 a year ago and the Zacks Consensus is now looking for $2.00 this year. That’s an earnings decline of 47%.
In fiscal 2017, analysts expect a bit of a rebound, with the Zacks Consensus at $2.62, or a 31% increase. But that is still well under fiscal 2015’s earnings.
Shares at Multi-Year Lows
Investors have been fleeing Bristow’s shares all year. They recently hit a multi-year low.
But are they cheap?
With the decline in earnings, they aren’t yet dirt cheap. Shares trade with a forward P/E of 13.9 which is under the average of the S&P 500 but value investors wouldn’t find that especially low.
If you must buy a stock in the energy services industry, you might want to consider Tidewater Inc. (TDW). It offers marine services to the industry. While its shares have also sunk, it’s currently a Zacks Rank #3 (Hold).
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.
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