Tidewater Pre-Announcement: Why Were Earnings Less Than Expected?

Tidewater (NYSE: TDW) is not scheduled to announce the company's results for fiscal 2011's second quarter, which ended on 30 September 2010, until 3 November.

The company, having already determined that its results would not measure up to the Wall Street consensus, shared this material information with investors by "preannouncing" preliminary results for the September quarter. Tidewater now estimates its diluted earnings per share in the September quarter were between $0.35 and $0.40 per share. The company noted that the Thomson First Call consensus estimate was $0.58 per share at the time of the announcement.

This was the second consecutive quarter that Tidewater "preannounced" disappointing earnings.

In our "look-ahead" for Tidewater's September quarter, posted 29 September 2010, we forecast earnings of $0.57 per share.

Why were earnings roughly $0.20 per share less than expected?

The first reason, which accounts for $0.09 of the shortfall, can be attributed to a $4.35 million charge to resolve an investigation related to the Foreign Corrupt Practices Act. We had thought, evidently erroneously, that Tidewater concluded this matter in the March 2010 quarter when the company recorded an $11.4 million charge.

The second reason, which explains the rest of the shortfall, or nearly so, was due to Tidewater increasing its estimated income tax rate for the year from 18.5 percent to 22.5 percent.

It may be comforting that Tidewater's revenue and operating costs in the latest quarter were generally consistent with prior targets. For example, Tidewater now estimates the September quarter had vessel revenue of approximately $267 million. Since the company's total revenue consists of this vessel revenue plus an additional, but typically modest, amount of "other marine revenues," our $270 million revenue target will probably be close to the actual results.

Tidewater also now expects that Vessel operating costs were approximately $170 million. This estimate is close to management's prior guidance and cannot be considered a surprise.

We will have to wait until next week to study the detailed results for the quarter.


Full disclosure: Long TDW at time of writing.