UPDATE 2-Tidewater Q2 profit lags Street, gives cautious outlook

* Sees some margin improvement in H2 2010

* Does not expect to return to avg margin levels of 50 pct

* Q2 adj EPS $1.24 vs est $1.37

* Q2 revenue down 15 percent

* Shares rise as much as 4 pct (Recasts; adds conference call details, analyst comments, share movement)

By Arundhati Ramanathan

BANGALORE, Oct 29 (Reuters) - Oil services company Tidewater Inc (TDW.N) posted an adjusted quarterly profit that fell short of market expectations, hurt partly by lower vessel operating margins, and remained cautious about its 2010 view.

"While we still believe margins will improve in the back end of fiscal 2010, we are more pessimistic regarding the remainder of the year than we were three months ago," Chief Financial Officer Quinn Fanning said on a conference call with analysts.

Fanning, however, does not see a return to average historical margins of 50 percent in fiscal 2010.

"The lower-than-expected profit was not a big surprise, and investors are probably looking beyond the results and considering how well the company may be positioned when it comes out of this downturn," Pritchard Capital analyst Mark Brown said.

"Tidewater stands to benefit once the market recovers and has fairly defensive characteristics if that does not happen."

Chief Executive Dean Taylor said the company was looking at a late 2010 or early 2011 pick-up in activity depending on customer demand.

"Though there may be some choppy seas in the short term, we are reasonably certain that the tide will turn at some point," Taylor said.

He added that bidding activity had nearly hit bottom, with an uptick in activity among drillers.

CFO Fanning said the company continues to expect a slowdown in stacking activity, and a decline in repair and maintenance costs during the remainder of the year.

WEAK Q2

Tidewater, the world's largest supplier of offshore vessels, posted a second-quarter net income of $98.2 million, or $1.90 a share, up from $95.4 million, or $1.85 a share, a year earlier.

Excluding a tax gain of 66 cents, the New Orleans, Louisiana-based company earned $1.24 a share.

Second-quarter revenue slumped 15 percent to $295.5 million due to lower international fleet revenue.

Analysts were looking for earnings of $1.37 a share, on revenue of $309.9 million, according to Thomson Reuters I/B/E/S.

Utilization fell to 71.3 percent, compared with 75.8 percent a year ago.

Tidewater shares rose as much as 4 percent to touch a high of $44.52 before shedding most of their gains to close up 34 cents at $43.35 Thursday on the New York Stock Exchange.

For the alerts, double-click [ID:nWNAB6612] (Reporting by Arundhati Ramanathan in Bangalore; Editing by Himani Sarkar)