| PARIS, March 1
PARIS, March 1 Shares in French oil industry
seismic surveying firm CGG extended their decline on
Friday for a second day as several analysts cut their forecasts
and price targets after disappointing results from the recently
The stock fell to as low as 17.5 euros on Friday, its lowest
level since June and a 16 percent drop in the last two days
after analysts said margins at seismic exploration equipment
unit Sercel were under pressure. The stock has dropped by almost
a third since its October highs.
On Thursday, CGG, which a month ago completed its $1.3
billion acquisition of Dutch engineer Fugro's
Geoscience seismic data unit, forecast a 25 percent rise in
revenue and an improved operating margin this year, having
reported a 78 percent rise in operating income to $365 million
for 2012 on sales up 7 percent at $3.4 billion.
The company also said its operating income for last year
would be $329 million if it includes non-recurring items related
to the Geoscience acquisition.
Analysts had on average expected operating income of $436
million on revenue of $3.6 billion for 2012 and revenue growth
of more than 30 percent in 2013, according to Thomson Reuters
"CGG delivered disappointing fourth-quarter results and we
expect negative revisions to consensus following 2013 guidance,"
Morgan Stanley analysts said in a note, cutting their price
target to 23 euros from 27 euros.
"We see 2013 as a transition year," they said.
Following the Geoscience acquisition CGG also changed its
brand name from CGGVeritas on Jan. 28, leading to a $30 million
impairment charge on the goodwill valuation of the Veritas
Growing competition and price pressure at Sercel also
concerned analysts. Revenue at the unit rose 5 percent last year
to $1.2 billion but was down 11 percent in the fourth quarter on
the previous year at $288 million.
Sercel's operating margin, typically above 30 percent,
slipped from 33 percent in the third quarter to 28 percent in
the fourth, a level at which it was set to remain over 2013,
Portzamparc analyst Nicolas Royot said in a note, cutting his
share price target to 24 euros.
"Sercel's profitability will suffer from an unfavourable mix
effect - more marine equipment and wireless products - and
increased competition - Schlumberger and Chinese
suppliers," Royot said.
HSBC lowered its target price on the stock again to 29 euros
from 31 euros after cutting it from 35 euros in late January.
HSBC maintained its "overweight" rating on the stock, however.
HSBC analysts said that while 2013 would be impacted by a
weaker performance by Sercel "the seismic recovery remains
intact", predicting a stronger second half and further
acceleration into next year.
CGG shares were trading down 4.7 percent at 18.11 euros by
(Editing by Greg Mahlich)