Thursday, August 1, 2013

Investopedia: Weatherford Burning Through Its Benefits Of The Doubt

Broadly speaking, there are two valid reasons to own Weatherford (NYSE:WFT). First, you believe that the company's position in markets like artificial lift, casing, and tool rental coupled with more disciplined management will lead to solid revenue and profit growth. Second, you believe that the company's process of getting its act together, including resolving tax/reporting issues, a FCPA investigation, and working capital management, will lift the penalty discount on the shares and/or prompt a buyout.

Judging by Weatherford's second quarter earnings, and the market's reaction, it seems like the second notion is in the lead. This wasn't a great quarter for the service sector, but Weatherford's quarter was pretty poor on an operating basis, and there's only just so much grace period that investors will give this management team. While I'm still content to own these shares on the basis of what I think is the underlying value to the business, the company needs to get its act together quickly.

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