Cameron Earnings, Revenue Miss Out

Zacks

Oil drilling equipment maker Cameron International Corp. (CAM) reported first quarter earnings per share – excluding charges – of 70 cents, missing the Zacks Consensus Estimate by 4 cents. The weaker-than-expected results were mainly due to muted North American activity levels.

However, comparing year over year, the Houston-based company’s earnings per share improved by a handsome 29.6% – from 54 cents (adjusted) to 70 cents – on strength in its surface systems business.

Cameron’s quarterly revenue, at $2,117.7 million, was up 17.4% year over year but was below the Zacks Consensus Estimate of $2,183.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,269.0 million in the first quarter, an increase of 21.8% from the year-ago period, while the DPS segment EBITDA rose 16.7% year over year to $198.1 million. The higher profitability could be attributed to the receipt of large subsea orders.

Valves & Measurement (V&M): Quarterly revenues in Cameron's V&M segment totaled $521.5 million, up 6.2% year over year. The segment EBITDA increased 19.8% year over year to $123.3 million. The positive comparisons were driven by strong infrastructure activity levels throughout the world.

Process & Compression Systems (PCS): Revenues in the PCS segment jumped 20.7% year over year to $327.2 million. The segment EBITDA witnessed a year-over-year improvement of 55.6% to $30.8 million, driven by operational efficiencies.

Backlog

During the quarter, Cameron received orders totaling $3,633.5 million, up 41.4% year over year, reflecting a 62.4% increase in the DPS segment. The composition of current order booking is 75% for DPS, 15% for V&M and 10% for PCS.

As of Mar 31, 2013, Cameron's total backlog stood at a record $10,037.0 million, up significantly from the year-earlier level of $6,766.5 million, driven by sharply higher backlog in the DPS segment.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditures amounted to $83.7 million. As of Mar 31, 2013, cash and cash equivalents stood at $1,082.4 million, while long-term debt was $2,048.4 million (with debt-to-capitalization ratio of 26.6%).

Guidance

Cameron management lowered its 2013 earnings per share guidance to the $3.50–$3.70 range from the previous band of $3.70–$3.95, while the second quarter profitability is likely to be in the range of 75–80 cents. The current Zacks Consensus Estimate for Cameron’s second quarter is 91 cents per share, while that for the full year is $3.87 per share – both higher than the company guidance.

Zacks Rank

Cameron, which competes with FMC Technologies Inc. (FTI) and National Oilwell Varco Inc. (NOV) in the ‘Oilfield Machineries and Equipment’ sector, currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at Natural Gas Services Group Inc. (NGS) as a good buying opportunity. This energy equipment supplier – sporting a Zacks Rank #2 (Buy) – has a solid secular growth stories with potential to rise from current levels.
 

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