Why ION Geophysical Has Outperformed the Industry Year-to-Date

ION Geophysical’s (IO) year-to-date returns as of May 11 were 37.5%. So far in 2018, it has outperformed the US rig count (rose 12%). During that period, it has also outperformed the Energy Select Sector SPDR ETF (XLE) (rose 6.2%), the VanEck Vectors Oil Services ETF (OIH) (rose 7.6%), and the SPDR S&P 500 ETF (SPY) (rose 2.2%). XLE tracks an index of US energy companies in the S&P 500 index.

ION Geophysical stock was at its year-to-date high of $31.55 on February 14. Since then and through May 11, it has fallen 14%.

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From the first quarter of 2017 through the first quarter of 2018, IO’s revenues increased 3%. Its reported net loss reduced to $18.4 million in the first quarter of this year, which was an improvement over the $23.3 million net loss reported in the first quarter of 2017. Significant improvement in its E&P Technology & Services segment was led by the new venture revenues originating from IO’s 3D (three-dimensional) multi-client reimaging programs in offshore Mexico and Brazil. Improvements to its top and bottom lines were also from higher revenues from its 2D (two-dimensional) multi-client programs in Mexico, Brazil, Argentina, Nigeria, East Africa, the Mediterranean, and the Caribbean.

IO’s free cash flow (or FCF) was negative but improved in the first quarter compared to negative FCF in the first quarter of 2017. During the same period, its net debt declined 38%. So improved revenues, lower net loss, and a lower debt level contributed to IO’s outperformance in 2018.

Next, we’ll compare the year-to-date returns for NOW (DNOW) with the market indicators and analyze its fundamental metrics.