Shortfall In TESO’s Q2 Results Due To A Slip In Revenue

Analyst William C Conroy of Pritchard Equity Research downgrades Tesco Corporation TESO from "buy" to "neutral," while raising his estimates for the company. The target price for TESO has been reduced from $16 to $13. TESO’s 2Q EPS missed the estimates and the consensus by a wide margin. According to Pritchard Equity Research, “The culprit was revenue, which at $85.4 million came in below our estimate of $92.0 million. The shortfall crossed all revenue reporting segments. The impact of breakup in Canada and the drilling moratorium was higher than we expected in Tubular Services, ‘proprietary’ revenue was $2.2 million below our $27.1 million estimate. Q2 2010 ending backlog stood at 22 units and backlog is 26 currently. Recently, the pace of orders has been inconsistent, thus the higher level today should not be trended through the end of the quarter. The good news is that TESO is about finished with orders placed on the books when pricing was generally lower.” “TESO was on the two rigs that are now drilling the Macondo relief wells. Since those rigs went into relief well duty in early May, TESO has absorbed the brunt of the impact of its MCLRS operations on those rigs ceasing, thus the incremental impact this quarter is less than we originally thought,” the analyst says. Pritchard Equity Research has raised its EPS estimates for 2010 and 2011 from $0.24 to $0.38 and from $0.65 to $0.79, respectively. More Analyst Ratings here.