(Adds analyst’s comments, updates share movement)
By Ajay Kamalakaran
BANGALORE, May 27 (Reuters) - Drilling equipment maker Flotek Industries Inc (FTK.N) lowered its 2008 earnings outlook citing weak first-quarter results and a higher interest rate cost for a convertible debenture, sending its shares down as much as 19 percent.
The company said it expects 2008 earnings of $1.12 to $1.22 a share, compared with its previous forecast of $1.50 to $1.60 a share. Analysts on average had expected earnings of $1.27 a share, according to Reuters Estimates.
“I think that the Street was widely expecting this downward revision and it was a question of how much and I think where they have placed guidance is pretty much right in the way of where the Street was expecting,” analyst Mark Brown of Pritchard Capital Partners said from New York.
“This is a stock that has been beaten down tremendously ever since October when it was trading at $55 and started missing earnings in the third quarter and fourth quarter of 2007,” Brown said.
Earlier this month, Flotek, whose shares have lost more than two-thirds of their value since hitting their highs in October, reported first-quarter profit of 18 cents a share, below analysts’ average estimate of 24 cents a share.
The company, which caters to the oil, gas and mining industries, blamed a delay in parts for the downhole tools segment and higher corporate costs for its weak results.
But Brown was optimistic on the stock. “I think that there are a number of drivers of growth that the investor community may start to revisit once all the bad news surrounding the earnings guidance settles.”
The analyst identified Flotek’s contracts for its microemulsion products with Halliburton Energy Services and international expansion as some of the growth drivers.
“The company... is hoping to get 10 percent to 12 percent of their revenue internationally by the end of ‘08, from 7 percent last year,” Brown said.
In February, Houston-based Flotek agreed to buy Teledrift Inc for $95.2 million to expand its offering of downhole drilling tools and boost international sales.
The company’s shares fell to $15.61, before recovering some losses to trade down $2.42 at $16.75, making them the top percentage loser on the New York Stock Exchange.
“There’s so much negativity around the stock, I actually think that the pullback they’ve received makes for a good buying opportunity,” Brown said. (Editing by Deepak Kannan, Amitha Rajan)