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Bearish Market Signals for Precision Drilling Corp. (PDS) Bearish Market Signals for Precision Drilling Corp. (PDS)

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2 Past Earnings Misses and Deteriorating Outlook

Precision Drilling Corp. PDS, renowned for providing contract drilling, well servicing, and strategic support in the oil, natural gas, and geothermal industries, finds itself in the doldrums.

The Unpleasing Zacks Rundown

Gracing the Zacks Rank #5 (Strong Sell), Precision Drilling toils in the abyss of the Zacks Oil and Gas – Drilling industry group, an underworld occupied by the most abysmal 18% of more than 250 Zacks Ranked Industries. It is, therefore, probable that this industry group will struggle to perform in the market over the next 3 to 6 months, replicating its dismal performance over recent months.

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Given its dwelling in a lackluster industry group, PDS seems a potential short position candidate. The stock has been notably absent from the recent market jubilation, exhibiting pronounced volatility over the past year.

Past Earnings Misses and Deteriorating Outlook

PDS has failed earnings estimates in two of the last four quarters, marking an average earnings miss of -13.9%. With analysts reducing EPS estimates for the coming quarter by 7.57% in the past 60 days, the company’s Q1 Zacks Consensus Estimate of $2.93/share reflects negative growth of -28.9% year-over-year.

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Such a downtrend in earnings estimates is a glaring red flag, signaling negative year-over-year growth – an appetizing feast for the bears.

Technical Outlook

PDS stock’s erratic ride, contrary to the general market’s upward trajectory, is evident in its wild swings around the moving averages (the blue and red lines). The stock lacks a discernible direction, rendering it arduous to reap profits from the bullish side.

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For PDS to garner interest for long positions, it needs to pull off an unexpected upward move and exhibit strengthening earnings estimate revisions. However, PDS shares have plummeted by more than 30% since the S&P 500 reached its nadir in late 2022.

Closing Thoughts

The amalgamation of deteriorating fundamentals and technical backdrop paints a desolate picture for PDS, refuting any possibility of scaling new peaks. Coupled with a history of earnings disappointments and waning future earnings estimates, the stock’s descent seems inescapable.

This unfavorable backdrop provides a fertile ground for bears, urging potential investors to contemplate embracing this stock as part of a short or hedge strategy. Conversely, bulls should avoid PDS shares until a substantial recovery looms on the horizon.

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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.