Oil States International Inc.  (OIS - Snapshot Report) negatively revised their guidance of the Well Site Services segment. Management cited decreased well activity, and weather related issues as the main culprits for the negative guidance. Specifically, revenue guidance was revised to between $85-90 million from between $110-120 million, and EBITDA margin guidance was revised from 19-21% to 13-14%.  Further, pricing pressures have also had a negative impact on the company as well. Due to these reasons, Oil States International has become the Zacks Bear of the Day.

This Zacks Ranked # 5 (Strong Sell) company is a diversified oilfield services company.  With locations around the world, Oil States is the leading manufacturer of products for deepwater production facilities and subsea pipelines, and a leasing supplier of a broad range of services to the oil and gas industry, including production-related rental tools, work force accommodations and logistics, oil country tubular goods distribution and land drilling services. Oil States is organized in three business segments; Offshore Products, Tubular Services, and Well Site Services.

In mid-June company management warned that Well Site Services would be negatively impacted, and therefore reduced their Q2 16 expectations for margins, and revenue. This revision was due to decreased U.S. rig activity, down 34% quarter over quarter, inclement weather in several states, and increased pricing pressure. Further, Oil States saw a 10% quarter over quarter decline in Offshore Product orders. Unfortunately, this trend does not seem to just stop in Q2, but seems to be an ongoing issue facing the company.  

Estimates Graph

The graph below shows Oil States Price and Estimate Consensus data.  As you can see estimates for OIS are expected to decline through 2016.

Over the past 30 days, estimates have declined for Q2 15, Q3 15, FY 15, and FY 16; Q2 15 dropped from $0.23 to $0.09, Q3 15 fell from $0.22 to $0.12, FY 15 shrank from $1.12 to $0.80, and FY 16 slipped from $1.30 to $0.97.

Bottom Line

The downward revision to both revenues and margins has the stock pulling back, and given the current Oil and Gas environment, there seems to be a very long tunnel before any light is seen. Further, it is not just Oil States that is seeing their numbers come under pressure; it’s the entire Oilfield Machine & Equipment segment. Currently, the entire segment of 21 companies is holding a Zacks Rank #3 (Hold) or worse.   

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