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Bear of the Day: Team Inc. (TISI)

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Managing a company is no easy task, and it is made more difficult when unexpected hurdles wipe out most the gains you previously made. That is what is facing our Zacks Bear of the Day, Team Inc. ( TISI ) who saw increased demand during their busy season, but then witnessed demand for their products plummet during the last two months of 2016. Further, this unexpected weakness has caused analysts to pencil in another year of uncertain market demands.

This Zacks Rank #5 (Strong Sell) is a professional full service provider of environmental engineering, consulting, monitoring and repair services. Environmental engineering, consulting and monitoring services, primarily in air quality together with on-stream leak repair and related industrial services for piping systems and process equipment, are provided by subsidiaries of the Company through its Environmental Services business segment.

Recent Earnings Data

On March 8th, management reported Q4 16 results where they significantly missed both the Zacks consensus earnings estimate (est. $0.45 vs. actual $0.08), and revenue estimate (est. $347 million vs. actual $320 million). The company posted a net loss of $12.7 million compared to a net income of $25.2 million in the year ago quarter. Also adjusted net income fell by -63.8% from Q4 15. Lastly, management also withheld earnings guidance for 2017 as they wait for a sustained pattern of market normalization.

Management's Take

According to Ted Owen, President and CEO, " We are obviously disappointed in our results for the quarter, especially after seeing increased demand levels during our busiest fall turnaround months of September and October. We were encouraged then that the early fall activity levels were the first signs of more normalized market activity, but that did not turn out to be the case. After the brief spike in demand for our services during the first month of the fourth quarter, demand weakened again in November and December. In spite of the soft demand in 2016, we continue to be optimistic that end markets will improve during 2017 and we are no less confident in the platform we are building as the premier industrial services company. However, until we begin to see a sustained pattern of market normalization, we will continue to withhold earnings guidance for 2017 ."

Price and Consensus Graph

As you can see in the graph below, the stock price has fallen of late, and future earnings estimates have also significantly declined.

Team, Inc. Price and Consensus

Team, Inc. Price and Consensus | Team, Inc. Quote

Declining Earnings Estimates

Due to the poor earnings results and the withholding of 2017 guidance earnings estimates for FY 17 and FY 18 have declined over the past seven days; FY 17 estimates plummeted from $2.05 to $0.98, and FY 18 earnings estimates fell from $2.55 and $1.88.

Bottom Line

While analysts have long term high hopes for Team Inc., they have reduced their overall guidance in the near term due to uncertainty surrounding the demand for their products. As of now it appears as though the first two quarters will be a bit bumpy for TISI, so it would be prudent to wait on the sidelines until demand picks back up. Analysts are expecting demand to ramp back up in the second half of 2017.

If you are inclined to invest in the Building Products/Maintenance Service sector, you would be best served by looking into ABM Industries ( ABM ), and or Rollins Inc. ( ROL ) both of whom currently carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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