Mitcham: Zacks’ Bear of the Day Play

Estimates have come down substantially after weak results, sending Mitcham to a Zacks Rank # 5 (Strong Sell).

About the Company

Mitcham Industries (MIND) specializes in leasing and sale of advanced seismic equipment that help oil companies explore for pockets of oil.

The company operates in two main business segments: equipment leasing and equipment manufacturing. During fiscal year ended January 1, 2013, leasing accounted for 52% of revenues; manufacturing 30% and 18% of revenues came from other equipment sales.

Founded in 1987, the company now has nine locations around the world, providing support and service to geophysical contractors.

Disappointing Fourth Quarter Results

MIND reported its fiscal 2015 second quarter results on September 3, 2014. Total revenues for the quarter were $19.5 million compared to $20.9 million in the same quarter last year. The loss for quarter was $3.3 million, or $(0.26) per share, compared to net loss of $0.7 million, or$(0.05) per share in the same priod last year

Zacks Consensus Estimate called for a loss of ($0.05) per share. The results were thus substantially worse than the estimates. The company has missed estimates in all of last four quarters.

According to the management “second quarter is typically the weakest of the year due to seasonal factors, yet this one proved to be weaker than we had anticipated, largely due to the current slowdown of the seismic industry and delays in a couple of projects.”

Downward Revisions

Due to weak results and uninspiring guidance, quarterly and annual estimates have been revised downwards in the past few weeks. Zacks consensus estimates for the current quarter and year are now $0.05per share and $0.44 per share respectively down from $0.14 per share and $0.80 per share, 7 days ago.

The following chart shows the trend of declining estimates for MIND:

Negative estimates revisions send MIND back to Zacks Rank # 5 (Strong Sell).

The Bottom Line

While the company has growth potential in much longer-term given positive outlook for the oil & gas exploration industry, near-term headwinds will keep the stock under pressure.

MIND is currently Zacks Rank # 5 (Strong Sell) stock. Further, Zacks Industry Rank of 152 out of 265 (bottom 43%) also indicates some weakness in the short- to mid- term. As such investors would like to avoid this stock for the time being.

Better Play?

Investors looking for plays in the “Oil machinery and equipment industry” could consider PowersSecure International (POWR) that carries a Zacks Rank of 1 (Strong Buy). The company delivered a solid beat recently and with an expected EPS growth of 30%, it may continue its outperformance going forward.

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