Tetra Technology give guidance on 2008

Posted by Tim

January 16, 2008

Tetra Technology (TTI: 22.26 -0.08 -0.36%) has issued a press release (link above) concerning the companies profitability for 2008. The company gave a per share income range of $1.30 to $1.55. “Analysts” were predicting $1.61 so the shares gave up quite a bit of ground. I read through the press release, and I really wonder why either the company or analysts give estimates and expect them to be close.

TTI is taking write down against insurance claims from 2005 hurricanes. They are also suing the insurance company to recover some or all of the written off money. They are paying a termination fee to a chemical supplier for their fluids division so they can start getting product from a newer, lower cost provider. The Maritech Resources division is writing off expenses towards lower volume wells due to the purchase late in the year of wells that should be more profitable. The company will not even comment on the profitability of the Compressco division, due to pending MLP securitization.

To me, it seems very difficult to forecast whether the write downs will be offset by the growth opportunities toward which the company is trying to set itself up. Also, the company historically has its lowest profit potential in the 1st quarter, with percentages of annual profits increasing as the quarters roll along.

As I read the press release, it seems the management is confident the changes that have been made will enhance profitability. When these profits really start to appear seems to be the big guess. With the stock currently trading at 12 times the low end of the companies estimated income, I do not see a lot of downside. TTI is a component of this site’s 20 Stock Portfolio. I do think it is a good idea to wait for the current overall market to swing upwards, but I am going to keep a close eye on TTI.

Note: I currently do not have a position in TTI.