Thursday, December 3, 2020

Transocean (RIG) Stock Spiked 30% in the First Hour Today, here is Why?

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The company reported Q3 earnings beating consensus estimates and investors were obviously very pleased.

The oil services provider, Transocean Ltd. (RIG) recently announced its third quarter results which were on the negative side yet they upbeat the Wall Street estimates at various points.  

Transocean shares were higher by a splendid 30% during the first hour of today’s trading session. 

However, RIG lost more than half of that gain by 10:30 A.M. EDT and was currently, trading at $0.83 soaring by almost 17%. The main reason why the stock took a sudden spike in the premarket was its after-market earnings release on November 2. 

Mixed Outcomes

The big takeaway from the quarter is really that the company’s results were mixed. For instance, the adjusted loss of $0.11 per share was much better than the $0.38 per share loss in the third quarter of 2019.

Transocean also beat Wall Street estimated loss of $0.17 per share. Investors usually look favorably on companies that beat analyst estimates and that is what enthuses the investors to jump in for trading and for that reason RIG was trading with a heavy volume of just over 43 million at the moment.

The fact that Transocean shares popped today, does not change the other fact that the energy sector is still facing a serious economic crisis and that is reflected in RIG’s third quarter performance (overall in loss). The material headwinds are leading to less spending on the part of the firm’s customers.

The sales were quite low compared to that in the same period last year. And for that reason, losing money is commonly not a good sign for a company despite the loss is less bad than consensus estimates. Moreover, the unprecedented economic situation due to global pandemic can not provide any surety regarding the near-future of any firm and that too in the loss. 

All things considered, the company is still working hard to cope up with this crisis situation and keep its costs in check. Almost $8.2 billion backlog of work is pending for Transocean to be completed. 

So, with low oil prices and the adverse influence of the market on the company and the oil and gas industry is serves, Transocean Ltd. (RIG) seems to be well-positioned to overcome this rough period. For the time being, the investors were upbeat on the company outcome, but it gradually seems to slow down. 

Looking Ahead

It’s worth noting that oil prices were rallying in early trading today, which always helps to brighten the mood of investors when it comes to energy-related names like Transocean. The company’s headline number, meanwhile, was a profit of $0.51 per share, but that included one-time gains so the adjusted figure noted above is the better number. Clearly, there was more at play here than meets the eye. 

The current period is a rough one for Transocean Ltd. (RIG) as it has still a sink hole to fill up. The one thing that investors can anticipate in the next few days is more stock price volatility.

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