Why Core Laboratories N.V. Stock Is Sinking Today

What happened

Shares of Core Laboratories (NYSE: CLB) are falling today, down around 10% as of 10:45 a.m. EDT, after the oil-field services specialist revised its guidance for the second quarter and the stock received an analyst downgrade.

So what

In Core Labs’ first-quarter report, the company stated that with a seasonally slow period now in the rearview mirror, its financial results should reaccelerate in the second quarter. That outlook led the company to forecast that revenue would come in between $177 million and $179 million and that earnings would be in a range of $0.64 to $0.66 per share.

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However, on Friday Core Labs announced that delays in the recovery of international oil-field development activity were having an impact on its financial results. As a result, the company revised its guidance and now anticipates revenue of $174 million to $175 million for the second quarter and earnings between $0.57 and $0.59 per share. That’s only slightly higher than what Core Labs reported in the first quarter. Meanwhile, it anticipates that those delays could continue impacting results in the third quarter, which led it to guide for revenue and earnings to be at its initial ranges for the second quarter. On a more positive note, the company does think that its results will start to pick up later in the fourth quarter and throughout 2019.

This downward revision led analysts at ABN Amro to downgrade Core Labs stock from hold to sell on Monday. Given the company’s expectations for an upcoming slow period, the analysts thought it was “time for a summer break” from the stock.

Now what

This isn’t the first time Core Labs has had to pull back on guidance after drilling activities didn’t improve as quickly as it expected. However, while the rebound has been slower than the company hoped, there is a reason for optimism about the future, because higher oil prices have given producers the confidence to sanction new large projects. With several starting up later this year, it should eventually provide a boost to Core Labs’ results, which makes today’s drop look like an even better buying opportunity.

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Matthew DiLallo owns shares of Core Laboratories. The Motley Fool recommends Core Laboratories. The Motley Fool has a disclosure policy.

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